Valued at a market cap of $33.3 billion, CGI (TSX:GIB.A) is among the largest tech companies in Canada. In the last 20 years, the TSX tech stock has returned more than 2,000% to shareholders, outpacing the broader market returns comfortably. This means that a $500 investment in CGI stock in May 2005 would be worth close to $11,000 today. Let’s see if you should own the large-cap TSX tech stock at the current valuation.
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Is this TSX tech stock a good buy right now?
CGI provides information technology and business process services across global industries. It delivers strategic IT consulting, systems integration, software solutions, application development and management, digital transformation, cybersecurity, and managed IT services. CGI’s intellectual property-based solutions and business consulting help organizations in the government, banking, healthcare, manufacturing, and transportation sectors.
CGI reported strong second-quarter (Q2) fiscal 2025 results (ended in March), with revenue reaching $4 billion, up 7.6% year over year (3.3% in constant currency), demonstrating resilience in a challenging business environment.
The company’s disciplined execution delivered $666 million in adjusted EBIT (earnings before interest and tax), indicating a 16.5% margin, while adjusted EPS (earnings per share) rose 7.6% to $2.12.
Bookings remained robust at $4.5 billion with a book-to-bill ratio of 112%, driven by strength in North America (124%) and managed services (122%). CGI ended fiscal Q2 with a global backlog of $31 billion, equivalent to twice annual revenue, providing visibility into future performance.
Managed services emerged as a key growth driver as clients increasingly seek operational efficiencies and cost savings. CEO François Boulanger noted that the pipeline for managed services opportunities has increased by over 15% compared to last year, reflecting strong client demand despite broader economic uncertainty.
CGI expanded its restructuring program, primarily targeting Continental Europe operations in the manufacturing and telecommunications sectors, where market conditions remain challenging. The initiative will impact approximately 1.5% of CGI’s workforce and is expected to improve utilization rates and restore European margins to historical levels.
Geographic performance varied significantly, with the U.K. and Australia leading growth at 12.1% in constant currency bolstered by the recent BJSS acquisition. U.S. segments collectively grew 7.2%, driven by the Aeyon and Daugherty acquisitions. North American operations expanded by 6.4%, while European operations grew by just 0.7%, reflecting softer conditions in Continental Europe.
CGI continues to execute its Build and Buy growth strategy, completing three acquisitions in Q2: BJSS (U.K.), Novatec (Germany/Spain), and Momentum Technologies (Quebec). Additionally, CGI announced an agreement to acquire Apside, which would add 2,500 professionals across France, Canada, Portugal, Belgium, Morocco, and Switzerland upon closing.
Capital allocation remains focused on reinvestment, with $100 million invested into the business (including artificial intelligence capabilities), $1.56 billion for acquisitions, $345 million for share repurchases, and $34 million in dividends. With a strong balance sheet and return on invested capital of 15.4%, CGI maintains financial flexibility to pursue both metro market and transformational acquisition opportunities.
Is CGI stock still undervalued?
Analysts tracking CGI stock expect adjusted earnings to expand from $7.62 per share in 2024 to $11.64 per share in 2029. CGI stock trades at a forward price-to-earnings multiple of 17.3 times, higher than its 10-year average of 16.9 times. If the TSX stock is priced at 16 times forward earnings, it will trade around $190 in May 2029, above the current price of $150.
Looking ahead, while clients are navigating macroeconomic uncertainties, CGI is well-positioned with its diversified business model, deep industry expertise, and growing managed services capabilities to deliver continued profitable growth.
