CGI Earnings: Revenue and Profitability Exceed Our Estimates as CGI Fires on All Cylinders

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.