Improved sales led to a 6.2% revenue boost for this company during the most-recent quarter. The company’s proven ‘Build and Buy’ strategy reduces risk and offers plenty of upside, making this a top pick for 2022.
Meanwhile, the stock trades at 17.6 times the company’s 2022 earnings forecast.
CGI INC. (Toronto symbol GIB.A; www.cgi.com) is your #1 Aggressive Buy for 2022.
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Canadian Growth Stocks: CGI Group, CAE Inc., Fortis Inc. Stock and more.
The stock lets investors tap Canada’s largest provider of computer outsourcing services. It helps its clients automate certain routine functions like accounting and buying supplies. That makes companies more efficient and lets them focus on their main businesses.
The company’s strong reputation continues to help it secure new contracts.
In fact, CGI follows what it calls a “Build and Buy” strategy. The “build” part refers to the expansion of its relationships with current clients as well as the development of new ones. The “buy” part involves making acquisitions. The company tempers the risk of buying other companies by targeting firms that complement its expertise or that help it to expand geographically.
For example, software developer Mobi724 Global Solutions Inc. (Toronto Venture Exchange symbol MOS) has awarded CGI a new 10-year contract to help it commercialize its main product, which helps banks and retailers manage their payment card rewards plans in real time. By using artificial intelligence, the software lets Mobi724’s clients create special offers and makes it easier for cardholders to pay for goods and services with their rewards points.
Under that strategy, the company has agreed to acquire Harwell Management. Based in France, that privately held firm provides consulting services to banks, insurers and other financial institutions. CGI has not yet said how much it’s paying for this business.
The company has also completed its acquisition of 70.6% of Umanis SA, a publicly traded French company that sells computer outsourcing services to clients in France, Spain, Luxembourg, Morocco and Switzerland. CGI now aims to buy the remaining 29.4% at the same price. In all, this purchase will cost $431.4 million.
Using acquisitions to expand adds risk. However, Umanis will strengthen CGI’s operations in Western and Southern Europe, which accounts for 17% of its total revenue.
Growth Stocks: Revenue, earnings and contract wins all look strong
Meanwhile, in its fiscal 2022 second quarter, ended March 31, 2022, the company’s revenue in the quarter rose 6.2%, to $3.27 billion from $3.08 billion a year earlier. That topped the consensus forecast of $3.19 billion. If you factor out currency rates, revenue rose 10.0% in the latest quarter.
Without unusual items, overall earnings in the quarter rose 9.4%, to $374.1 million from $341.9 million. CGI prefers to reward investors with share buybacks instead of paying dividends. Due to fewer shares outstanding, earnings per share improved 13.3%, to $1.53 from $1.35. That also beat the consensus estimate of $1.51 a share.
CGI signed $3.32 billion in new contracts during the quarter. It’s book-to-bill ratio in the past 12 months is also a healthy 108.7% (a figure below 100% implies demand for its services is falling).
As well, the company’s contract backlog at the end of the quarter was $23.14 billion, or 1.87 times its annual revenue. That cuts your risk.
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