
Following the company’s first quarter results, National Bank Financial analyst Richard Tse has maintained his “Outperform” rating on CGI Group (CGI Group Stock Quote, Chart, News, Analysts, Financials TSX:GIB.A).
On January 29, CGI reported its Q1, 2025 results. The company posted Adjusted EBIT of $611.7-million on revenue of $3.79-billion, a topline that was up 5.1%, year-over-year.
“CGI began fiscal 2025 with positive momentum as our team’s disciplined execution of our plan delivered strong first quarter results, even as some client industries continued to navigate a dynamic business environment,” CEO François Boulanger said. “Our positioning as a trusted advisor for helping clients achieve outcomes from digitization—including through AI—contributed to bookings of over $4.1 billion, or 110% of revenue. The acceleration of our M&A investments continues to expand our client relationships and capabilities to drive stakeholder value this year and for the long-term. Importantly, cash from operations reached a new high of nearly $650 million in the quarter which further strengthens our capacity to fuel our build and buy profitable growth strategy for the future.”
Tse says there may be more upside to CGI than some think.
“We believe CGI is in the midst of an accelerating pace of capital deployment (on acquisitions) under its “new” CEO and given the Company’s strong track record on this front (underscored by a robust ROIC of 16.2%), we think that will drive a valuation re-rating off an accompanying accelerating growth profile.”
In a research update to clients January 29, the analyst maintained his “Outperform” rating and price target of $185.00 on CGI Group, implying a return of 12.6% at the time of publication.
Tse thinks CGI will post EBITDA of $3.16-billion on revenue of $15.6-billion in fiscal 2025. He expects those numbers will improve to EBITDA of $3.31-billion on revenue of $16.4-billion in fiscal 2026.
“Bottom line, we continue to believe CGI is a premium operator in the IT Services market,” the analyst added. “When combined with M&A and attractive defensive attributes (e.g., recurring revenue and cash flow, long-term contracts), continued execution in a challenging market should benefit from operating leverage as the market normalizes and CGI picks up scale through an accelerating pace of acquisitions.”
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