Value investing is a strategy whereby you identify quality companies that trade at a discount to their intrinsic value. One such oversold TSX stock is CGI Inc. (TSX:GIB.A), which has a market capitalization of $26.2 billion.
Down over 30% from all-time highs, CGI provides comprehensive information technology and business process services, including strategic IT consulting, systems integration, software solutions, application development and modernization, cybersecurity, cloud services, intelligent automation, advanced analytics, and managed IT infrastructure.
The Montreal-based company serves clients across various sectors, including government, financial services, healthcare, utilities, communications, energy, manufacturing, insurance, and transportation. It operates globally, spanning North America, Europe, the Asia Pacific, and other international markets.
Despite the ongoing pullback, the TSX tech stock has returned 130% to shareholders over the past decade. Let’s see if CGI stock is a good value buy right now.
The bull case for this undervalued TSX stock
CGI reported fiscal fourth quarter (ended in September) revenue of $4 billion, up 9.7% year-over-year, as the IT services provider demonstrated disciplined execution despite persistent market uncertainty.
The company reported adjusted EBIT (earnings before interest and taxes) of $667 million, indicating a healthy margin of 16.6%, while adjusted diluted earnings per share increased 11% to $2.13.
CGI ended fiscal 2025 with $4.8 billion in bookings and a book-to-bill ratio of 119% led by U.S. Federal at 185%, though management warned of near-term revenue headwinds from the prolonged government shutdown.
Full-year fiscal 2025 performance highlighted revenue growth of 4.6% on a constant currency basis, with managed services up 6% as CGI successfully navigated challenging macroeconomic conditions.
Annual bookings totalled $17.6 billion, with full-year book-to-bill ratios exceeding 100% in both North America and Europe, driven by the strength of managed services.
The company deployed over $3.7 billion in capital during fiscal 2025, including $1.8 billion on five accretive acquisitions, $1.3 billion on share buybacks, and $135 million in dividends. The board approved a 13% dividend increase for the first quarter of fiscal 2026, underscoring its confidence in the company’s cash generation capabilities.
AI strategy
CGI aims to embed artificial intelligence across consulting, systems integration, and managed services while leveraging its intellectual property portfolio, where 65% of strategic IP solutions now incorporate intelligent automation.
CGI currently operates over 200 AI agents across various solutions with its DigiOps suite delivering productivity gains up to 30% for application management and 40% faster resolution of operational IT requests. The pipeline of AI-integrated opportunities increased nearly $5 billion year-over-year, while alliance-related bookings surged over 120%.
CFO Steve Perron highlighted that the company ended the quarter with $2.4 billion in readily available capital resources and a net debt-to-equity ratio of 1.0, providing substantial balance sheet strength to pursue its profitable growth strategy.
The contracted backlog reached $31.5 billion, which is twice its annual sales. Management expects the U.S. government shutdown to impact next quarter’s revenue by approximately $60 million to $75 million, with a margin impact of $15 million to $22 million. However, booking momentum suggests a recovery once normal procurement cycles resume.
What is the CGI stock price target?
Analysts tracking the TSX tech stock forecast revenue to increase from $15.9 billion in fiscal 2025 to $20.9 billion in fiscal 2030. In this period, adjusted earnings are forecast to expand from $8.30 per share to $12.77 per share.
Currently, CGI stock trades at 13.5 times forward earnings, which is higher than its 10-year average of 17.9 times. If the tech stock reverts to its historical average multiple, it could surge close to 90% within the next four years. Given consensus price targets, CGI stock trades at a 30% discount in November 2025.
