A Canadian tech stock focused on growth

Montreal-headquartered CGI Group Inc. is an information technology stock specializing in application software. This growth stock’s services include the management of IT and business functions, systems integration and consulting, as well as the sale of software solutions.

CGI Group Inc. (TSX—GIB.A; NYSE—GIB),  has never been one to shy away from acquisitive growth whether of the bolt-on or transformative variety.

Most recently, this Canadian growth stock wrapped up the acquisition of Collaborative Consulting, a Boston-based firm with 400 professionals and annualized revenue of US$76 million. With the acquisitions, the company will be better able to provide IT services in the U.S.

Commenting on the transaction, David L. Henderson, president of CGI’s U.S. operations, said that buying Collaborative will have a positive impact on the Canadian technology company’s U.S. Northeast operations while also serving as a platform for organic growth of the stock’s overall U.S. operations going forward.

Growth stock’s performance based on ‘Build and Buy’

Meanwhile, CGI President and CEO George D. Schindler added in a statement that the Collaborative transaction is part of the company’s Build and Buy strategy that calls for pursuing transformational and bolt-on deals that will facilitate future expansion in select metro markets.

Earlier this year, then CGI CEO Michael Roach indicated that the company could tap its cash pile to buy back shares and to pursue a major acquisition deal which would complement its US$2.6 billion deal to buy Logical PLC back in 2012. In a Bloomberg report in January, Mr. Roach explained that CGI could spend up to $8 billion in cash on the right transaction without having to issue new shares.

In a Nov. 9 research note, meanwhile, Credit Suisse analysts Robert Peters and Mohammad Khan, who keep their ‘outperform’ recommendation and increase their 12-month target price to $72 per share from $68 per share, say that the company is achieving solid organic growth. They explain that CGI achieved organic growth, to close out 2016, that was close to three per cent higher on a year-over-year basis.

Top growth stock makes top ten

The Investor’s Digest of Canada ‘Morning Call’ is a monthly survey of Canadian securities analysts’ buy, sell, hold advice plus earnings estimates on more than 1,000 Canadian companies.

CGI Group ranked in the top ten stocks to buy on the survey list. All five of the analysts who cover CGI Group rate this tech stock a ‘buy’.

 

Investor’s Digest of Canada, MPL Communications Inc.
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