CGI Group (GIB): 2019 Top Picks' Mid-Year Update

07/17/2019 5:00 am EST


Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

Gordon Pape, Canadian stock expert and editor of The Internet Wealth Builder, picked CGI Group (GIB) as his top speculative idea for 2019. The stock has since risen 57%. Here's his latest update on this IT firm.

Founded in 1976, Montreal-based CGI Group is the one of the largest independent information technology and business process services firm in the world.

At the time of my recommendation, I described it as an international company with excellent upside potential. So far, it has worked out. The stock was up 20.6% in the first half of the year.

The company’s second quarter results for fiscal 2019 were strong across the board. Revenue was up 4% year-over-year to just over $3 billion (figures in Canadian dollars).

Adjusted earnings were $324.5 million ($1.17 per share, fully diluted) compared to $303.2 million ($1.04 per share) the year before. That represents a 12.5% increase on an earnings per share basis.

CGI continues to expand internationally. On April 16, it completed the acquisition of Acando AB, a leading IT management and consulting services firm in Northern Europe and Germany.

Acando brings over 2,100 consultants to CGI from five countries across Europe, notably in the major metro markets of Stockholm, Oslo, and Hamburg.

The company’s growth-by-acquisition strategy continues to work well, and the stock market has realized it. There appears to be more upside potential in the stock and I continue to rate it as a buy.

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