CGI Stock: Outperforming Among Falling Tech Stocks

CGI stock (TSX:GIB.A) has blasted past 52-week highs, on top of long-term growth that’s remained stable throughout the decades.

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 September 26, 2023 12:00 pm EDT

| More on: GIB.A

In recent years, the tech stock market has seen its fair share of turbulence. Many high-flying companies have experienced significant ups and downs. However, amidst this volatility, one standout performer has been CGI stock (TSX: GIB.A).

While other tech giants have struggled, CGI’s shares have not only weathered the storm but also seen substantial growth. In this article, we will delve into why CGI stock has been a notable exception in the tech sector. So, let’s examine its impressive historical performance, recent developments, and future outlook.

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Why CGI stock

CGI stock has defied market trends, with its shares climbing from $103 to $140 since June. This marks impressive growth of approximately 36% over a three-month period. Moreover, over the last decade, CGI stock has soared from $36 to $140, showcasing an astounding compound annual growth rate (CAGR) of 14.5%. Such consistent and robust growth in the tech sector is indeed a rarity, making CGI stock an intriguing investment opportunity.

Recent developments

CGI has recently made significant announcements that underscore its potential for future growth. The company secured a prestigious 5-year task order for the ongoing development of the Department of Homeland Security’s U.S. Citizenship and Immigration Services’ digital immigration records systems. This contract, with a total potential value of US$159 million, solidifies CGI’s position by modernizing government infrastructure.

Additionally, CGI revealed its ambitious plan to invest $1 billion over the next three years to bolster its artificial intelligence (AI) services and solutions. In partnership with clients, CGI aims to accelerate the adoption of AI technologies while ensuring responsible and ethical implementation. This investment signals CGI’s commitment to staying at the forefront of AI innovation and delivering cutting-edge solutions to its clients.

Future outlook

CGI’s recent financial results further bolster its status as an attractive investment option. In the third-quarter of fiscal 2023, the company reported revenue of $3.6 billion, representing a remarkable year-over-year increase of 11.2%. Excluding the impact of foreign currency fluctuations, CGI’s revenue still grew by a commendable 6.3% year over year.

The company’s strategic investments have also yielded positive outcomes. Its strong quarterly bookings, particularly in the government and financial services sectors, demonstrate this. CGI’s diversified portfolio of geographies, industries, and services positions it as a resilient foundation for profitable growth, even in the face of a challenging macroeconomic environment.

Furthermore, CGI’s commitment to shareholder value is evident in its investments and capital management strategies. In the third quarter of fiscal 2023, the company invested $101.5 million back into its business and allocated $53.1 million to repurchase its Class A subordinate voting shares. This underscores its confidence in its own growth potential.

CGI’s robust financial health is underscored by its decreasing long-term debt and lease liabilities, accompanied by a reduction in net debt. As of June 30, 2023, the company boasted $1.5 billion in cash reserves (excluding client funds) and a fully available revolving credit facility, providing a substantial $3 billion in readily available liquidity to pursue its profitable growth strategy.

Bottom line

In a tech stock landscape marked by volatility and uncertainty, CGI stands out as a beacon of stability and growth. The company’s impressive historical performance, recent contract wins, commitment to AI innovation, and strong financial results all point to a promising future.

As CGI continues to expand its footprint in both government and private sectors, investors may find this tech stalwart a compelling addition to their portfolios. With its solid financials, strategic investments, and a commitment to responsible technology use, CGI is well-positioned to thrive in the ever-evolving tech industry. As always, prospective investors should conduct their due diligence and consider their own financial goals before making any investment decisions in the stock market.