CGI is doubling down on growth through acquisition, and National Bank Financial is betting on the strategy paying off, maintaining an “Outperform” rating and a C$185 price target ahead of the company’s second-quarter results.
CGI (CGI Stock Quote, Chart, News, Analysts, Financials TSX:GIB.A) received the rating and 12-month price target from National Bank Financial Markets analyst Richard Tse, based on 13.7x EV/EBITDA on revised fiscal 2025 estimates.
The report comes ahead of CGI’s upcoming second-quarter earnings report, scheduled for April 30.
In the April 24 NBCF markets research industry note, Tse said while he expects the company’s second quarter of 2025 fiscal year results to be in line, he anticipates softer bookings and cautious commentary, particularly due to paused awards in the U.S. Federal government sector and broader macroeconomic uncertainty. However, Tse pointed to CGI’s accelerated pace of acquisitions as a key driver for growth.
Tse said CGI’s strong balance sheet and ramped-up capital deployment strategy are positioning the company well for long-term expansion despite near-term market volatility.
“With respect to capital deployment, we estimate CGI’s deployed C$1.3+ billion in capital on acquisitions since Francois Boulanger assumed the CEO role in October 2024 vs the C$390-million deployed across all of F2024; approximately C$0.9-billion of those acquisitions have already closed, with the remaining C$400-million acquisition of Apside expected to close in June (end of CGI’s FQ3’25).
“If we assume a transaction multiple of 1.0x revenue on average, the acquisitions should contribute C$1.3+ billion in annualized revenue to CGI and close to C$500-million in FH2’25. We’ve revised our FY25 forecasts to reflect this pickup in M&A; that said, we’ve assumed a more conservative margin profile from the recent acquisitions resulting some margin contraction.”
Tse forecasts that CGI will generate EPS of $2.14 on revenue of $4.01-billion in the upcoming quarter.
“We continue to believe CGI is a premium operator, with M&A opportunities and attractive defensive attributes (e.g., recurring revenue and cash flow, long-term contracts),” Tse said. “We reiterate our Outperform rating and C$185 DCF-based target, which implies a valuation of 13.7x EV/EBITDA on our revised FY25 estimates (from 14.1x).”
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About The Author /
Rod Weatherbie is a journalist based in Prince Edward Island. Since 2004, he has written extensively about the Canadian property and casualty insurance landscape. He was also a founder and contributing editor for a Toronto-based arts website and a PEI-based food magazine. His fiction and poetry have been featured in The Fiddlehead, The Antigonish Review, and Juniper.
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