CGI Inc. earns more each year. This blue chip Canadian technology stock is reasonably priced. It’s a buy for long-term capital gains, but only if you need no dividends.
We regularly review Montreal-based technology stock CGI Inc. Since we published our July 23 issue, its shares have slipped by 4.7 per cent. On the positive side, the company’s earnings continue to rise. In the 2021 fiscal year (period ending September 30), its earnings climbed by nine per cent, to $5.92 a share.
CGI “is among the largest independent IT (Information Technology) and business consulting services firms in the world. With 80,000 consultants and other professionals across the globe, CGI delivers an end-to-end portfolio of capabilities, from strategic IT and business consulting to systems integration, managed IT and business process services and intellectual property solutions. CGI works with clients through a local relationship model complemented by a global delivery network that helps clients digitally transform their organizations and accelerate results”.
CGI continues to do well
President and chief executive officer George Schindler said: “CGI ended fiscal 2021 in a strong position, with accelerating revenue growth and a robust book of business and balance sheet.” Indeed, the company ended fiscal 2021 with a higher order backlog of $13.843 billion. This is 114.2 per cent of its revenue of $12.127 billion. On September 30, CGI held cash and prepaid expenses of $1.872 billion. Subtract this from total debt of $4.179 billion and its net debt is $2.307 billion. This is only 1.2 times the company’s cash flow over the previous four quarters. That’s well within our usual comfort zone of two times or less.
Mr. Schindler said: “Looking to the year ahead, we will accelerate our investments in the talent and capabilities necessary to expand our services and global footprint in support of clients’ evolving digital transformations.” In fiscal 2022, which began on October 1, CGI’s earnings are expected to grow by 8.1 per cent, to $6.40 a share. Based on this estimate, the stock trades at a fair forward price-to-earnings ratio of 17 times.
CGI is ‘Very Conservative’. Its attractive valuation makes it likely to hold up better than most.
This blue chip Canadian technology stock remains a buy for long-term share price gains. But only if you need no dividends.
This is an edited version of an article that was originally published for subscribers in the December 3, 2021, issue of The Investment Reporter. You can profit from the award-winning advice subscribers receive regularly in The Investment Reporter.
The Investment Reporter, MPL Communications Inc.
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The Investment Reporter •1/5/22 •