Stanley enhances CGI’s U.S. prospects

Article Excerpt

CGI GROUP INC. $15 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 279.5 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.1; No dividends paid; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. It also operates in 15 other countries. Canada provided 60% of CGI’s revenue in its latest fiscal quarter, followed by the U.S. (35%) and Europe (5%). CGI follows what it calls a “Build and Buy” strategy. The “Build” part refers to expanding relationships with its existing clients and attracting new ones. The company’s outsourcing contracts typically last 5 to 10 years. That gives it steady, predictable revenue streams. The “Buy” part of the company’s strategy involves making acquisitions. CGI cuts the risk of growing by acquisition by purchasing smaller companies that enhance its products, or expand its geographic reach. CGI’s latest purchase is Stanley Inc., which provides computer-outsourcing services to military and civilian agencies of the U.S. government. Military and intelligence customers now represent…

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