Why This Overlooked TSX Stock Could Be Bay Street’s Best Secret

CGI is an overlooked TSX stock quietly compounding value via sticky government and enterprise contracts, strong cash flow, and AI-driven secular growth.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 22, 2025 3:30 pm EDT

| More on: GIB.A

Key Points

CGI is Canada’s largest IT services firm, with sticky, long-term government and enterprise contracts driving predictable revenue.
Strong finances support growth and per-share gains.
Main risks include contract delays, cost overruns, or backlog failing to convert, which could slow earnings and valuation.

With all this talk about artificial intelligence (AI), gold, crypto and more on the markets, it can be really hard to dig through the weeds and find a truly overlooked TSX stock. Yet today, we’re not gatekeeping anymore (like we ever have).

That’s why we’re going to jump right into why CGI (TSX:GIB.A) is one overlooked TSX stock that investors should dig right into. So, without further ado, let’s get into it.

Investor wonders if it's safe to buy stocks now — Source: Getty Images

About CGI

CGI is Canada’s largest IT services company, but it rarely gets the buzz of other tech stocks. It doesn’t make flashy consumer apps or headline-grabbing AI products. Instead, it’s a behind-the-scenes powerhouse that builds and maintains the digital systems governments and Fortune 500s depend on.

Its bread and butter includes enterprise software, cybersecurity, data analytics, and AI integration. That’s the plumbing that keeps banks, telecoms, and public agencies running smoothly. It operates in over 40 countries with more than 90,000 employees, generating billions in annual revenue. Because these contracts are sticky and long term, CGI’s cash flow is remarkably consistent.

Right now, the TSX stock has a large backlog of contracts of about US$30 billion, and strong recurring revenue from long-term enterprise and government clients. With digital transformation continuing across governments and enterprises, CGI is positioned for secular tailwinds rather than cyclical busts.

The numbers

Despite being a solid TSX stock in the AI field, CGI trades at just 16 times earnings at writing. This is very cheap for a company that continues to grow its earnings. Most recently, earnings per share (EPS) have increased by about 10% year over year. Its operating margin sits near 15%, among the best in the global IT services space. The backlog covers nearly two years of future revenue. That visibility makes it a compounding machine.

Free cash flow generation is consistently strong as well. In fiscal 2024, CGI produced about $1.8 billion in free cash flow. Management tends to reinvest that money into share buybacks and acquisitions rather than paying large dividends, which accelerates per-share growth. This buyback-first strategy has quietly reduced the share count by more than 30% over the last decade, driving long-term value that few talk about.

As CGI wins more large contracts and integrates them efficiently, its earnings and free cash flow should rise faster than in recent years. That could drive higher valuations. And while Canadian headquartered, CGI has meaningful global operations. Growth outside Canada could offer upside beyond domestic markets. All these points point to a company only rising higher.

Foolish takeaway

Of course, no stock is without risk. Large-contract businesses can face delays, cost overruns or client churn. If the backlog doesn’t convert into profit growth as expected, returns could lag. Yet in Canada’s new B2B AI strategy, CGI is a natural leader. It already partners with governments on secure data projects and with corporations looking to modernize their systems responsibly. As more organizations adopt AI, especially in regulated sectors like finance, telecom, and public services, CGI’s deep expertise and compliance credentials make it the go-to integrator.

If you’re searching for a TSX stock that’s overlooked but has all the traits of a long-term wealth builder, CGI fits that profile perfectly. It’s profitable, globally diversified, undervalued, and quietly positioned to benefit from one of the biggest secular trends in business: the AI and digital transformation of enterprise systems.