CGI: Charting The Future Of Digital Transformation With Superior Profitability And Greater Resilience

Summary

• CGI has a strong business model, with a global presence, substantial scale, a suite of related services, and deep expertise. It represents a compelling offering for large multinationals/Governments, and smaller ones.
• The technology industry is, and has always experienced several tailwinds that allow it to maintain strong growth decade-on-decade, with the likes of AI and Cloud being key drivers going forward.
• The company has an impressive backlog of ~2x FY22 revenue, ensuring its growth in the coming years will be strong despite the macroeconomic conditions.
• CGI performs well relative to its peers, with superior profitability and greater resilience expected in the coming year. This outperformance is enhanced by its consistency historically and competitive advantage.
• CGI’s valuation is attractive without screaming undervalued. Given its history of buybacks and financial progression, the stock is unlikely to ever be cheap.

VioletaStoimenova

Investment thesis

Our current investment thesis is:

• CGI is a high-quality compounder in our view. Management has shrewdly developed a globally competitive business with a diversified array of services. This has allowed it to operate above-average margins and achieve consistent growth, funding

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.