CGI (GIB.A) AI Stock Analysis

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CGI

(TSX:GIB.A)

Rating:60Neutral

Price Target:

C$155.00

▲(5.06%Upside)

CGI's stock score reflects a balanced perspective. The primary strength lies in its strong balance sheet and consistent cash flow, providing a financial cushion. Earnings growth and acquisitions offer optimism, but operational inefficiencies and restructuring costs pose risks. Technical indicators and valuation provide a neutral outlook, aligning the stock's score at 60.

Positive Factors

Earnings

CGI Group has reported a strong fourth quarter performance, setting a promising tone for the year ahead.

Market Demand

Demand for AI solutions continues to grow, with clients reinvesting savings into new projects, driving demand for additional business.

Mergers and Acquisitions

CGI recently announced three acquisitions and cited a robust M&A pipeline targeting both tuck-ins and larger deals.

Negative Factors

Client Demand

Policy uncertainty from Washington is negatively impacting client demand globally, especially for growth-oriented projects.

Macroeconomic Uncertainty

The impact of macro and geopolitical uncertainty is leading clients to slow their decision-making due to frustrations with planning.

Pricing Pressure

There is caution on pricing pressure, particularly in US Federal, due to ongoing headwinds and competitive pressures.

CGI (GIB.A) vs. iShares MSCI Canada ETF (EWC)

Market Cap

$32.72B

Dividend Yield0.3%

Average Volume (3M)409.05K

Price to Earnings (P/E)19.0

Beta (1Y)0.62

Revenue Growth4.60%

EPS Growth8.67%

CountryCA

Employees94,000

SectorTechnology

Sector Strength83

IndustryInformation Technology Services

Share Statistics

EPS (TTM)2.12

Shares Outstanding200,268,840

10 Day Avg. Volume366,651

30 Day Avg. Volume409,053

Financial Highlights & Ratios

PEG Ratio29.28

Price to Book (P/B)3.26

Price to Sales (P/S)0.00

P/FCF Ratio16.31

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$172.12

Price Target Upside16.66% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering10

CGI Business Overview & Revenue Model

Company DescriptionCGI Inc., together with its subsidiaries, provides information technology (IT) and business process services in Canada; Western, Southern, Central, and Eastern Europe; Australia; Scandinavia; Finland, Poland, and Baltics; the United States; the United Kingdom; and the Asia Pacific. Its services include the management of IT and business outsourcing, systems integration and consulting, and software solutions selling activities. The company also offers application development, integration and maintenance, testing, portfolio management, and modernization services; business consulting; and a suite of business process services designed to address the needs of specific industries, as well as IT infrastructure services. It serves clients operating in government, banking and capital market, health, utility, communication and media, oil and gas, retail, consumer and services, space, manufacturing, insurance, life sciences, retail and consumer service, and transportation and logistics sectors. The company was formerly known as CGI Group Inc. and changed its name to CGI Inc. in January 2019. CGI Inc. was founded in 1976 and is headquartered in Montreal, Canada.

How the Company Makes MoneyCGI Inc. generates revenue through a diversified portfolio of IT and business consulting services. The company earns money primarily through long-term outsourcing contracts, systems integration, and consulting services. Key revenue streams include managed IT and business process services, which involve taking over a client's IT operations and business processes to improve efficiency and reduce costs. CGI also provides intellectual property-based solutions and ensures recurring revenue through ongoing support and maintenance services. Significant partnerships with technology vendors and strategic acquisitions further contribute to its earnings by expanding service offerings and market reach.

CGI Earnings Call Summary

Earnings Call Date:Apr 30, 2025

(Q2-2025)

% Change Since: -0.59%|

Next Earnings Date:Jul 30, 2025

Earnings Call Sentiment Neutral

The earnings call highlights CGI's strong revenue growth, successful acquisitions, and solid managed services performance. However, challenges remain in Continental Europe, pressure on earnings margins, and ongoing restructuring costs. The overall sentiment is balanced with optimistic growth prospects and notable challenges.

Q2-2025 Updates

Positive Updates

Revenue Growth

CGI delivered $4 billion in revenue, up 7.6% year-over-year or 3.3% excluding foreign exchange impacts, driven by recent business acquisitions.

Strong Book-to-Bill Ratio

Bookings were $4.5 billion for a book-to-bill ratio of 112%, with North America at 124% and Europe at 101%.

Successful Acquisitions

Completed three acquisitions in Q2: BJSS, Novatec, and Momentum Technologies, expanding presence in the UK, Germany, Spain, and Quebec City.

Managed Services Growth

Managed services bookings exceeded $5 billion, up 21% year-over-year, indicating strong demand for cost-saving solutions.

Solid Cash Generation

Generated $438 million in cash from operations, representing 11% of total revenue.

Negative Updates

Continental Europe Softness

Revenue growth in Europe was only 0.7% due to softer market conditions, particularly in manufacturing and telecommunications sectors.

Restructuring Costs

Incurred $44 million in restructuring costs with an additional $137 million expected, impacting approximately 1.5% of CGI employees.

Earnings Margin Pressure

Earnings before income taxes margin was 14.5%, down 90 basis points year-over-year due to restructuring and acquisition-related costs.

IP Revenue Decline

IP revenue represented 21.5% of total revenue, down 90 basis points year-over-year due to dilutive impact of acquisitions.

Company Guidance

In the second quarter of fiscal 2025, CGI reported $4 billion in revenue, marking a 7.6% year-over-year increase, or 3.3% when excluding foreign exchange impacts. The company's adjusted EBIT rose by 5.9% to $666 million, yielding a margin of 16.5%. Earnings before income taxes were $583 million, with a 14.5% margin, while adjusted net earnings reached $481 million, reflecting an 11.9% margin. CGI's book-to-bill ratio was 112%, with North America achieving 124%. The company's backlog stood at $31 billion, equivalent to twice its revenue. Restructuring costs in the quarter amounted to $44 million, with an additional $137 million expected in future quarters, affecting 1.5% of the workforce. Cash from operations was $438 million, or 11% of total revenue, and CGI invested heavily in acquisitions, stock buybacks, and dividends, maintaining a robust return on invested capital of 15.4%.

CGI Financial Statement Overview

Summary

CGI shows mixed financial performance with operational inefficiencies leading to negative gross and EBIT margins. However, the company maintains profitability through strong revenue growth, a solid balance sheet with low leverage, and robust cash flow generation.

Income Statement

Neutral

The TTM (Trailing-Twelve-Months) financials reveal a concerning trend with a negative gross profit, leading to substantial operating losses. Despite this, the company maintains a positive net income, indicating effective cost controls or non-operating income benefits. Revenue has shown consistent growth, improving by 3.2% year-over-year in the latest annual report. However, the negative EBIT margin in the TTM period is a significant drawback, highlighting operational inefficiencies.

Balance Sheet

Positive

CGI demonstrates a strong balance sheet with a debt-to-equity ratio of 0.43, indicating manageable leverage levels. The equity ratio stands at 54.33%, reflecting a stable capital structure. The return on equity is commendable at approximately 17.14%, showcasing effective use of shareholder funds to generate profits. These metrics suggest financial stability and a solid foundation despite operational challenges.

Cash Flow

Positive

The cash flow statements highlight robust free cash flow generation, with a healthy operating cash flow to net income ratio of 1.27. Free cash flow growth remains positive, although it has slightly decreased in the TTM period compared to previous years. This stability in cash flows supports the company's ongoing operations and strategic investments, providing a cushion against operational weaknesses.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
15.14B	14.68B	14.30B	12.87B	12.13B	12.16B
	Gross Profit
-20.87B	2.42B	2.31B	2.82B	2.72B	2.74B
	EBIT
-21.54B	2.47B	2.34B	2.09B	1.94B	1.86B
	EBITDA
3.00B	2.89B	2.81B	2.53B	2.45B	2.42B
	Net Income Common Stockholders
1.74B	1.69B	1.63B	1.47B	1.37B	1.12B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.27B	1.46B	1.67B	1.00B	1.72B	1.73B
	Total Assets
15.74B	16.69B	15.80B	15.18B	15.02B	15.55B
	Total Debt
3.03B	3.31B	3.74B	3.98B	4.18B	4.46B
	Net Debt
1.76B	1.85B	2.17B	3.01B	2.48B	2.76B
	Total Liabilities
6.89B	7.26B	7.49B	7.90B	8.03B	8.29B
	Stockholders Equity
8.85B	9.43B	8.31B	7.27B	6.99B	7.26B
Cash Flow		Free Cash Flow
1.99B	2.10B	1.81B	1.57B	1.88B	1.70B
	Operating Cash Flow
2.21B	2.20B	2.11B	1.86B	2.12B	1.94B
	Investing Cash Flow
-2.31B	-775.38M	-561.86M	-911.95M	-397.55M	-572.45M
	Financing Cash Flow
-190.19M	-1.61B	-1.19B	-1.59B	-1.65B	94.17M

CGI Technical Analysis

Technical Analysis Sentiment

Negative

Last Price147.54

Price Trends

50DMA

145.43

Positive

100DMA

152.07

Negative

200DMA

153.75

Negative

Market Momentum

MACD

0.19

Positive

RSI

50.15

Neutral

STOCH

31.65

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:GIB.A, the sentiment is Negative. The current price of 147.54 is below the 20-day moving average (MA) of 148.45, above the 50-day MA of 145.43, and below the 200-day MA of 153.75, indicating a neutral trend. The MACD of 0.19 indicates Positive momentum. The RSI at 50.15 is Neutral, neither overbought nor oversold. The STOCH value of 31.65 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:GIB.A.

CGI Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	62 Neutral	$11.75B	10.58	-7.10%	2.91%	7.47%	-7.95%
GIB.A	60 Neutral	$32.72B	19.00	18.44%	0.30%	4.60%	8.67%
KNR	58 Neutral	C$104.58M	13.71	124.21%	―	-52.43%	941.71%
ALYAF		$134.31M	―	-2.51%	―	―	―
PVT	51 Neutral	C$29.82M	―	-18.24%	―	-10.76%	-19.28%

* Technology Sector Average

Performance Comparison

TSE:GIB.A

CGI

147.02

8.34

6.02%

TSE:KNR

Kontrol Technologies

2.50

0.00

0.00%

ALYAF

Alithya Group

1.35

-0.16

-10.60%

TSE:PVT

Pivotree

1.15

-0.21

-15.44%

CGI Corporate Events

Business Operations and StrategyFinancial Disclosures

CGI Achieves Strong Q2 Fiscal 2025 Results with Revenue Surpassing $4 Billion

Positive

Apr 30, 2025

CGI reported robust financial results for the second quarter of Fiscal 2025, with revenue surpassing $4 billion, marking a 7.6% increase year-over-year. The company’s strategic execution and financial resilience are evident in its strong bookings of $4.48 billion, reflecting sustained client trust and confidence in CGI’s expertise. Despite a challenging business environment, CGI’s performance underscores its solid market positioning and commitment to supporting clients’ business objectives.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.