Company Reports

We are maintaining our CAD 137 fair value estimate for narrow-moat CGI after the release of fiscal second-quarter results. Bookings, a forward-looking metric, came down sequentially in what can be a seasonally slower quarter, and the book/bill ratio declined to roughly 100% from 116% last quarter. Our read is that the short-term revenue outlook remains a bit cloudy as some industries remain cautious in their IT spending and certain larger engagements get delayed. However, we think the macro backdrop has bottomed and spending should eventually improve, even if short-term predictions remain difficult. We are decreasing our short-term revenue outlook slightly while leaving our longer-term growth expectations in place. Also, additional commentary from management about reinvesting a portion of the current margin uplift in the business led us to slightly moderate our long-term margin assumption. The combined effect is an unchanged fair value estimate of CAD 137 per share, although changes in exchange rates move our US dollar-denominated fair value estimate to $99 per share from $102. We view the shares as fairly valued.

CGI is a leading global IT-services firm, catering a bit more to governmental agencies than its peers, providing managed IT, consulting, and intellectual property solutions. We believe that CGI benefits from strong switching costs and intangible assets, which lead us to assign the firm a narrow economic moat rating. Despite the macroeconomic headwinds, CGI has posted steady revenue due to long-term contracts with many of its clients. We think such stability will continue with the help of CGI’s switching costs and intangible assets, which both work to create stickiness among existing customers.

We maintain our CAD 137 fair value estimate for narrow-moat CGI after the firm kicked off fiscal 2024 with a strong set of results, combining top-line growth with an increased emphasis on operational discipline, as evidenced by the firm’s cost optimization program. With forward-looking metrics such as bookings showing strength, we think a mixture of an improving macro as well as client demand for AI solutions will provide positive tailwinds for CGI’s near-term sales. At the same time, we expect management’s cost optimization program to provide a margin uplift in the medium to long term. With shares trading slightly up after the earnings report, we view them as marginally overvalued.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the macroeconomic headwinds, CGI has posted steady revenues due to its long-term contracts with many of its clients. We think such stability will continue with the help of CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.

We are raising our fair value estimate for narrow-moat CGI to CAD 137 from CAD 130. This raise is a result of solid fourth-quarter financial results as well as the time value of money following our valuation model roll. While macro pressures continued to stretch clients’ budgets, we are impressed by CGI’s ability to maintain a steady ship, producing strong sales and profitability during this turbulent period. We reiterate our belief that as macroeconomic pressures dissipate over the next few quarters, we expect CGI’s clients to restart/accelerate their spending on CGI’s solutions. With shares trading slightly down after the earnings report, we view them as fairly valued.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the macroeconomic headwinds, CGI has posted steady revenues due to its long-term contracts with many of its clients. We think such stability will continue with the help of CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.

We are maintaining our CAD 130 fair value estimate for narrow-moat CGI after the firm closed out the third quarter of fiscal 2023 with strong financial results, including double-digit top-line growth and strong bookings. We believe that as the macroeconomic pressures on CGI’s clients ease, they will increasingly restart/accelerate their digital transformation plans, a tailwind for an IT services company such as CGI. At the same time, we have been impressed with CGI’s ability to navigate the tough macro while maintaining robust financial results, a testament to the firm’s strong value proposition to its clients, in both good and bad times. With shares trading slightly down after the earnings report at CAD 133, we believe that the company’s shares are fairly valued.

We are raising our fair value estimate to CAD 130 from CAD 119 for narrow-moat CGI after the firm reported strong financial results with its sales and profitability both exceeding our prior estimates. In a tough macro environment, CGI is seeing robust demand for its solutions as businesses seek to cut costs by outsourcing IT labor. We believe CGI’s ability to deliver strong financial results during this tough macro environment underscores the strong switching costs and intangible assets the firm has built up over time. With shares trading around CAD 135, we believe that the company’s shares are fairly valued.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the macroeconomic headwinds, CGI has posted steady revenues due to its long-term contracts with many of its clients, and we think such stability will continue with the help of a stable trend for both CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.

We are maintaining our CAD 119 fair value estimate for narrow-moat CGI after the firm reported strong financial results to kick off fiscal 2023. We continue to have a favorable view of the firm's business pipeline and fundamentals. We believe that CGI's ability to deliver strong financial results during a time of macro uncertainty demonstrates the strong switching costs and intangible assets the firm has built up over time. With shares trading around CAD 120, up 5% as of Feb. 1, we believe the market has finally calibrated its valuation to reflect the underlying strength of CGI&'s business that we have been highlighting for the past few quarters.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the macroeconomic headwinds, CGI has posted steady revenues due to its long-term contracts with many of its clients, and we think such stability will continue with the help of a stable trend for both CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.

Narrow-moat CGI reported top-line results largely in line with our expectations to finish off fiscal 2022. We continue to view the firm's business pipeline as healthy, an observation underscored by the company's continued broad-based strength and an annual book/bill ratio well above 100%. While the firm faces macroeconomic challenges, primarily in the form of currency-related headwinds, we reiterate our confidence in the company's medium- to long-term growth prospects. Factoring in slightly improved profitability assumptions and the time value of money following our valuation model roll, we are raising our fair value estimate to CAD 119 per share from CAD 110 per share and view the shares as fairly valued.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the macroeconomic headwinds, CGI has posted steady revenues due to its long-term contracts with many of its clients, and we think such stability will continue with the help of a stable trend for both CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the economic headwinds brought on by COVID-19, CGI has posted steady revenues due to its long-term contracts with many of its clients, and we think such stability will continue with the help of a stable trend for both CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.

We are resuming coverage of narrow-moat CGI with a CAD 110 fair value estimate. Shares appear fairly valued to us. Our long-term forecasts are unchanged, as we continue to positively view CGI’s overall business and its strength with governmental agencies across the world.

We are placing CGI under review and expect to resume coverage in the near future.

We are maintaining our CAD 110 fair value estimate for CGI after the firm reported a strong second quarter of fiscal 2022, marginally above our estimates. We continue to have a favorable view of the firm's business pipeline and fundamentals. Our outlook is reinforced by CGI's broad-based strength across its verticals and a book-to-bill ratio above 100%. In addition, we believe CGI's narrow economic moat, based on its sticky product portfolio and intangible assets, will allow the firm to deliver continued shareholder value. We continue to view the firm's shares as fairly valued.

We are maintaining our CAD 110 fair value estimate for CGI after the firm reported a strong first quarter of fiscal 2022, largely in line with our estimates. We continue to have a favorable view of the firm's business pipeline and fundamentals. Our outlook is strengthened by CGI's broad-based strength across its verticals and a book/bill ratio well above 100%. In addition, we believe CGI's narrow economic moat, based on its sticky product portfolio and intangible assets, will allow the firm to deliver continued shareholder value. We continue to view the firm's shares as fairly valued.

Narrow-moat CGI reported top line results largely in line with our expectations to finish off fiscal 2021. We continue to view the firm’s business pipeline as healthy, an observation underscored by the company’s continued strength across verticals and an annual book/bill ratio well above 100%. As a result, we reiterate our confidence in the company’s medium- to long-term growth prospects. With our strong near-term growth assumptions and the time value of money following our valuation model roll, we are raising our fair value estimate to CAD 110 per share from CAD 104 per share and view the shares as fairly valued.

CGI is a leading global IT services firm, catering a bit more to governmental agencies than its peers, while providing managed IT, consulting, and IP solutions. We believe that CGI benefits from strong switching costs and intangible assets, the combination of which leads us to assign the firm a narrow economic moat rating. Despite the economic headwinds brought on by COVID-19, CGI has posted steady revenues due to its long-term contracts with many of its clients, and we think such stability will continue with the help of a stable trend for both CGI’s switching costs and intangible assets, which both work to create stickiness amongst existing customers.