TELUS International (CDA) (TIXT) AI Stock Analysis

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TELUS International (CDA)

(TSX:TIXT)

Rating:66Neutral

Price Target:

C$4.00

▲( 9.59% Upside)

TELUS International's stock is moderately rated due to strong cash flow and client relationships, offset by profitability challenges and increasing leverage. While technical indicators are slightly positive, valuation concerns and margin pressures weigh on the overall score.

Positive Factors

Client Diversification

TIXT has made strong progress to diversify its business with Meta over the past year.

Client Growth

The majority of Telus’s top five clients grew year-over-year and quarter-over-quarter, with its top account increasing 12% year-over-year to $178.2 million.

Revenue Performance

TIXT delivered $370 million in revenue, exceeding consensus estimates of about $350 million.

Negative Factors

Google Business Decline

The Google business has weakened considerably with revenues declining by about 16%.

Profit and Revenue Pressure

TIXT lacks near-term catalysts as revenue growth and profits are under pressure from client concentration and a weaker IT services demand environment.

Trust & Safety Segment Risk

TIXT’s Trust & Safety segment remains an area of volatility and potential downside risk.

TELUS International (CDA) (TIXT) vs. iShares MSCI Canada ETF (EWC)

Market Cap

$1.01B

Dividend YieldN/A

Average Volume (3M)173.19K

Price to Earnings (P/E)36.0

Beta (1Y)1.42

Revenue Growth2.87%

EPS Growth-271.63%

CountryCA

Employees78,879

SectorTechnology

Sector Strength77

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)0.08

Shares Outstanding111,490,166

10 Day Avg. Volume179,956

30 Day Avg. Volume173,189

Financial Highlights & Ratios

PEG Ratio0.02

Price to Book (P/B)0.42

Price to Sales (P/S)0.00

P/FCF Ratio2.26

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$5.44

Price Target Upside49.14% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering8

TELUS International (CDA) Business Overview & Revenue Model

Company DescriptionTELUS International (CDA) Inc. (TIXT) is a leading digital customer experience and IT services provider. The company operates in sectors including technology, gaming, communications and media, eCommerce, financial services, healthcare, and travel and hospitality. TELUS International specializes in designing, building, and delivering next-generation digital solutions to enhance customer experience and drive digital transformation. Its core services encompass digital strategy, AI solutions, IT lifecycle services, and omnichannel customer care.

How the Company Makes MoneyTELUS International generates revenue primarily through its comprehensive suite of digital solutions and services tailored to meet the needs of various industries. The company's key revenue streams include digital customer experience management services, IT services, and consulting. Significant revenue is derived from long-term contracts with large enterprises in sectors such as technology, telecommunications, and healthcare. TELUS International also benefits from strategic partnerships and alliances that enhance its service offerings and expand its market reach. By leveraging its expertise in AI and machine learning, the company provides innovative solutions that help clients improve efficiency and customer satisfaction, thus driving revenue growth.

TELUS International (CDA) Financial Statement Overview

Summary

TELUS International (CDA) faces challenges with declining revenue and negative net income, impacting its profitability metrics. However, it maintains a strong gross profit margin and a stable balance sheet with manageable leverage. The cash flow statement reflects effective cash management, although growth in cash generation needs attention. Overall, the company demonstrates a stable financial base but needs to address profitability to enhance its financial health.

Income Statement

Neutral

TELUS International (CDA) has shown a decline in revenue from $2.71 billion in 2023 to $2.66 billion in 2024, resulting in a negative revenue growth rate. The gross profit margin remains strong at approximately 81%, but the net profit margin has turned negative due to a net loss of $61 million in 2024 compared to a net income of $54 million in 2023. The EBIT margin has also decreased significantly. These results suggest challenges in maintaining profitability despite a high gross profit margin.

Balance Sheet

Positive

The company's balance sheet shows a moderate debt-to-equity ratio of 0.78, indicating a balanced approach to leverage. The equity ratio stands at approximately 43%, suggesting a stable capital structure. However, the return on equity has turned negative due to the net loss, indicating challenges in generating returns for shareholders. Overall, the balance sheet reflects stability in terms of asset management but highlights concerns regarding profitability.

Cash Flow

Positive

TELUS International (CDA) has demonstrated strong cash flow management, with a positive operating cash flow of $517 million and free cash flow of $412 million in 2024. The free cash flow to net income ratio indicates efficient cash generation relative to income. However, the free cash flow growth is minimal compared to the previous year, pointing to a need for improvement in cash generation capabilities. Despite this, the company maintains a solid cash flow position, providing a cushion for future investments.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.66B	2.71B	2.47B	2.19B	1.58B
	Gross Profit
2.15B	2.25B	2.00B	1.76B	1.28B
	EBIT
52.00M	183.00M	284.00M	185.00M	194.40M
	EBITDA
437.00M	523.43M	527.25M	439.10M	396.92M
	Net Income Common Stockholders
-61.00M	54.00M	183.00M	78.00M	103.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
174.00M	131.00M	125.00M	115.00M	152.50M
	Total Assets
4.52B	4.82B	3.56B	3.63B	3.74B
	Total Debt
1.52B	1.75B	964.00M	1.15B	1.77B
	Net Debt
1.35B	1.62B	839.00M	1.03B	1.61B
	Total Liabilities
2.58B	2.79B	1.72B	1.97B	2.63B
	Stockholders Equity
1.95B	2.04B	1.84B	1.66B	1.11B
Cash Flow		Free Cash Flow
412.00M	409.00M	332.00M	183.00M	203.80M
	Operating Cash Flow
517.00M	498.00M	437.00M	282.00M	263.00M
	Investing Cash Flow
-107.00M	-941.00M	-119.00M	-110.00M	-1.87B
	Financing Cash Flow
-361.00M	443.00M	-300.00M	-206.00M	1.69B

TELUS International (CDA) Technical Analysis

Technical Analysis Sentiment

Negative

Last Price3.65

Price Trends

50DMA

3.67

Negative

100DMA

4.35

Negative

200DMA

4.72

Negative

Market Momentum

MACD

0.06

Negative

RSI

46.75

Neutral

STOCH

21.43

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:TIXT, the sentiment is Negative. The current price of 3.65 is below the 20-day moving average (MA) of 3.70, below the 50-day MA of 3.67, and below the 200-day MA of 4.72, indicating a bearish trend. The MACD of 0.06 indicates Negative momentum. The RSI at 46.75 is Neutral, neither overbought nor oversold. The STOCH value of 21.43 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:TIXT.

TELUS International (CDA) Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NOW	68 Neutral	C$56.49M	14.63	679.89%	―	-10.35%	―
TIXT	66 Neutral	$1.01B	35.99	-5.70%	―	2.87%	-271.63%
STC	64 Neutral	C$263.38M	―	-2.67%	―	-1.72%	76.81%
Sector *	61 Neutral	$11.29B	10.07	-7.05%	2.96%	7.47%	-10.75%
CVO	61 Neutral	C$662.69M	―	-9.00%	―	8.86%	56.67%
BB	58 Neutral	$3.09B	―	-7.59%	―	-31.15%	30.02%
DND	49 Neutral	C$684.10M	―	-39.72%	0.74%	2.47%	19.37%

* Technology Sector Average

Performance Comparison

TSE:TIXT

TELUS International (CDA)

3.65

-4.28

-53.97%

TSE:BB

BlackBerry

5.18

1.15

28.54%

TSE:STC

Sangoma Technologies

7.84

0.72

10.11%

TSE:DND

Dye & Durham

10.18

-2.15

-17.44%

TSE:NOW

NowVertical Group Inc

0.60

0.36

150.00%

TSE:CVO

Coveo Solutions

6.89

-1.02

-12.90%

TELUS International (CDA) Earnings Call Summary

Earnings Call Date:May 09, 2025

(Q1-2025)

% Change Since: -0.82%|

Next Earnings Date:Aug 01, 2025

Earnings Call Sentiment Neutral

The earnings call presented a balanced view with moderate revenue growth and strong client relationships countered by a decline in adjusted EBITDA margin and increased leverage. While there are promising developments in AI, data solutions, and strategic partnerships, financial challenges remain, particularly in maintaining profitability and managing leverage.

Q1-2025 Updates

Positive Updates

Revenue Growth

TELUS International (Cda) Inc. reported a revenue of $670 million, an increase of 2% year over year, or 3% on a constant currency basis, reflecting growth in AI and data solutions and digital solutions.

Strong Client Relationships

Revenue with TELUS, the largest client, grew 12% year over year. There was also growth with a leading social media client, contributing to a diversified client base.

Expansion in AI and Data Solutions

The company is working on various AI and data solutions, including training solutions for large language models (LLM) and has seen growth in this service line with several clients.

Partnerships and New Client Wins

New partnerships and client expansions were noted, including a partnership with Sumsub for trust, safety, and security solutions, and growth in sectors such as healthcare and financial services.

Negative Updates

Decline in Adjusted EBITDA Margin

The adjusted EBITDA margin was 13.4%, a decrease year over year due to increased salaries and benefits, higher capital expenditures, and an unfavorable comparison with the previous year.

Leverage Ratio Increase

The net debt to adjusted EBITDA leverage ratio increased to 3.4 times as of March 31, compared to 3.2 times as of December 31.

Challenges in Specific Industry Verticals

While there was growth in tech and games, it was partially offset by lower revenue from other clients in this vertical. There were also challenges in maintaining stable revenue across certain geographies.

Company Guidance

During the Q1 2025 investor call, TELUS International (Cda) Inc. reaffirmed its guidance for the full fiscal year, projecting approximately 2% organic revenue growth, with an adjusted EBITDA of around $400 million and an adjusted diluted EPS of 32¢. In Q1 2025, the company reported a revenue of $670 million, a 2% year-over-year increase, or 3% on a constant currency basis. The adjusted EBITDA margin for the quarter was 13.4%, reflecting an increase in salaries and benefits. The company also noted a year-over-year growth in revenue from its largest client, TELUS, by 12%, while AI and data solutions and digital solutions also contributed to overall revenue growth. The company highlighted its focus on geographic and service diversification, aiming to navigate market uncertainties and sustain growth through enhanced client engagement, AI-driven solutions, and strategic partnerships.

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.