CGI GROUP INC. $27 - Toronto symbol GIB.A

CGI GROUP INC. $27 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 308.0 million; Market cap: $8.3 billion; Price-to-sales ratio: 1.3; No dividends paid; TSINetwork Rating: Extra Risk; www. cgi.com) continues to benefit from its $2.7-billion purchase of Logica plc in August 2012. This U.K.-based firm provides computer outsourcing services in 36 countries.

Thanks to these new operations, CGI’s revenue in its fiscal 2013 first quarter, which ended December 31, 2012, jumped 145.4% to $2.5 billion from $1.0 billion a year earlier. If you exclude integration costs and other unusual items, earnings rose 29.4%, to $137.8 million from $106.5 million. Earnings per share rose 10.0%, to $0.44 from $0.40, on more shares outstanding.

CGI booked $2.8 billion of new contracts during the quarter, up 104.4% from $1.4 billion a year earlier. Its order backlog is now $18.3 billion.

The company plans to make more acquisitions in the next few years. It’s particularly interested in expanding in Asia, which accounts for just 5% of its revenue. Expanding by acquisition adds risk, but CGI has a long history integrating new businesses and improving their profitability.

CGI is up 80% since we made it our Stock of the Year for 2010 (it was also our #1 pick in 2011). Even so, it’s still attractive at 13.3 times the company’s likely 2013 earnings of $2.03 a share.

CGI Group is a buy.

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