Canadian tech consulting firm CGI Group (CGI Group Stock Quote, Chart, News TSX:GIB.A) has done well to gain back ground lost to COVID-19 but the stock still remains well off its highs set earlier this year. But portfolio manager Kim Bolton says in the world of professional services, he’s choosing Accenture over CGI.
“This is always a balance between CGI and Accenture and, you know, they always end up as finalists,” said Bolton, president of Black Swan Dexteritas, in conversation with BNN Bloomberg on Wednesday. “But the one that we actually picked here, which is very much a leader when you look at the Gartner research and their Magic Quadrant is Accenture.”
“But CGI, if we wanted to expand within that sort of information services sector, that would be a good candidate,” Bolton said.
CGI made news this week by appointing former Governor of the Bank of Canada Stephen Poloz to its board of directors, along with green energy veteran Mary Powell.
“Stephen Poloz's deep knowledge of financial markets, the global economy and international trade will be an invaluable asset to CGI as we continue to help worldwide organizations grow their businesses,” said CGI founder and executive chairman Serge Godin in a press release. “Mary Powell's utilities expertise will significantly benefit our presence in that space, and she also has a strong commitment to social responsibility that is very much aligned with CGI's objectives.”
CGI had been on a remarkable growth trajectory literally for the past decade, with its share price rising from about $15.00 in mid-2010 to as high as $114.00 by January of this year.
CGI finished 2019 up 30 per cent as was heading for more through January before the stock was hobbled by a poorly received quarterly report on January 29, one which delivered an earnings miss at $1.23 per share versus the expected $1.25 per share.
Growth in the company’s bookings was also lower than expected with contract wins dropping globally.
Earnings again were an issue with its late-April quarterly report where revenue grew by 2.0 per cent year-over-year through the first stretch of COVID-19 but net earnings fell from $318.3 million a year ago to $314.8 million. Adjusted EBIT was $483.2 million compared to $454.1 million a year earlier.
CEO George Schindler said the April quarterly numbers spoke to the company’s resilient and diversified business model as well as CGI’s operational efficiencies, while the company’s balance sheet remains strong with cash from operations of $396.5 million and a backlog as of the end of March of $22.99 billion.
“Our diversified mix of critical services, vertical markets and multiple geographies helped, and is helping, mitigate the impact of COVID-19 on client demand,” Schindler said in the April quarterly press release. “The pandemic has created unprecedented business conditions and I am proud of our members' ongoing commitment to ensuring service continuity for CGI clients in a safe and flexible manner.”
Year-to-date, CGI Group is down 18 per cent.
Pick your spots, that’s the advice from National Bank Financial analysts Richard Tse and John Shao, who recently published a...