CGI Group (TSX:GIB.A): 3 Reasons to Buy This Top Tech Stock Today

CGI Group stock is up 448% in the last ten years, as this tech stock is well positioned to continue to capitalize on secular trends.

| More on:

CGI Group Inc. (TSX:GIB.A)(NYSE:GIB) stock is one of Canada’s leading technology stocks. Since 1976, it has grown into one of the largest IT and business consulting services firms in the world. But lately, CGI stock has been weak.

Here are the reasons I believe this weakness is a strong buying opportunity.

Riding the technology secular trend higher

A secular trend is a trend that remains consistent over time. It is usually a trend that lasts five or more years. A cyclical trend, on the other hand, is a trend that follows a short term cycle. Commodity sectors are good examples of cyclical trends. They are much more volatile, as they have booming periods followed by down periods.

CGI Group is helping its clients enter the new digital world. Its services are helping its clients reduce costs and increase revenue. The digitization movement has been accelerated. The initial response to the pandemic was business preservation. Companies were looking to advance their digital strategies to ensure continuity of business and ultimately survival. Long-term, the focus is shifting to using digital strategies to further increase efficiencies and reduce costs.

The digitization of all industries was already under way before the coronavirus hit. Now, it is in full swing. But this movement is still in relatively early stages — a secular trend will drive CGI Group stock higher for years to come. The goal of industries everywhere is to use technology to thrive in the new post-coronavirus world.

CGI Group stock has fallen in 2020, giving way to a strong buying opportunity today

In 2020, CGI Group stock has fallen 18%. It is kind of a surprising move, as CGI is helping businesses survive and thrive in this new world where digitization is key. But to understand this better, let’s dig deeper. CGI Group is a $19.7 billion behemoth who services a diversified list of clients. From governments to companies from a variety of different sectors, CGI is extensively involved in the technology movement.

Here is a price graph of CGI Group stock over the last decade. This price graph is the perfect illustration of what being in a secular growth market will do to your stock price.

Other than the downward blip in March 2020, CGI Group stock has been on a consistent upward rise.

CGI Group: the future looks bright for this tech stock

Moving on to the outlook for CGI, the company still expects to double the size of the company in the next five to seven years. The path there will be, as usual for CGI, through organic growth and acquisitions.

CGI has maintained a stellar balance sheet throughout its history. And strong quarterly cash from operations continues to build on that. Management articulated on the call that the time for them to make an acquisition is fast approaching. CGI Group has $1.7 billion of cash on hand and a $1.5 billion revolver. Cash from operations was $492 million in the quarter and $1.9 billion for the full fiscal year 2020.

Motley Fool: the bottom line

CGI Group stock presents us with a positive opportunity today. Recent share price weakness has given us a good entry point to participate in the secular trend with this technology giant. CGI Group stock is a tech stock to buy today for its record of consistent shareholder value creation.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas owns shares of CGI GROUP INC CL A SV. The Motley Fool recommends CGI GROUP INC CL A SV.

More on Investing

exchange traded funds
Dividend Stocks

1 Top High-Yield Dividend ETF to Buy to Generate Passive Income

An ETF designed as a long-term foundational holding pays generous monthly dividends.

Read more »

Canadian Dollars bills
Dividend Stocks

Invest $10,000 in This Dividend Stock for $2,430.12 in Passive Income

This dividend stock has proven time and again it's a safe, reliable stock that still has the power to explode…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

3 Canadian Dividend Stocks to Consider Adding to Your TFSA in 2025

If you're looking for long-term, undervalued dividend stocks to pick up in your TFSA, consider these first.

Read more »

dividends grow over time
Dividend Stocks

These Are the Top 4 Undervalued Stocks to Buy Right Now

These four undervalued stocks offer a change to get in on great value long term, with promising futures ahead.

Read more »

Canadian dollars are printed
Dividend Stocks

Build a Cash-Gushing Passive-Income Portfolio With Just $25,000

An investment of $25,000 in these high-yield Canadian dividend stocks can help you earn $1,955 in tax-free passive income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

1 Superb Canadian Dividend Stock Down 17% to Buy in Bulk

This dividend stock is a standout option.

Read more »

stock research, analyze data
Dividend Stocks

Where Will Canadian Tire Stock Be in 5 Years?

With Canadian Tire stock still trading roughly 20% off its all-time high, is it one of the best investments you…

Read more »

worker holds seedling in soybean field
Dividend Stocks

Is Nutrien Stock a Buy for Its 4.2% Dividend Yield

Nutrien stock is bouncing back with a 13% gain in 2025. With rising crop prices and a solid 4.2% dividend…

Read more »