CGI Group Inc. - Value

The consultants are always among the first to see real growth as they are brought in when the animal spirits are revived. CGI Group Inc. (GIB) has surprised on the Zacks Consensus Estimate 3 out of the last 4 quarters. The Zacks #1 Rank (strong buy) is also a value stock, trading at just 12.9x forward estimates.

Canada-based CGI Group provides independent information technology and business process services including consulting, systems integration, the full management of IT and business functions, and other business solutions to clients around the world.

CGI Group Surprised By 31% in the Fiscal First Quarter

On Jan 26, CGI Group reported fiscal first quarter results that beat the Zacks Consensus by 11 cents. Earnings per share were 46 cents compared to the consensus of 35 cents (all figures are in Canadian dollars.) The company made just 37 cents in the year ago quarter.

Revenue jumped 22.7% to $1.1 billion or, on a constant currency basis, it rose 25.9%. This was primarily due to increased client project activity as well as impact from its fourth quarter 2010 acquisition of Stanley.

In the fourth quarter, CGI Group booked $1.2 billion in new contract wins, extensions and renewals. At the end of December 2010, the backlog was $13.1 billion, or about 3x annual revenue.

Share Repurchase Plan

In the fourth quarter, the company repurchased $81 million in shares. Over the course of fiscal 2010, it bought 28.3 million shares for an investment of $434 million.

In fiscal 2011, it intends to purchase about 23 million shares, or about 10% of the company’s public float.

Zacks Consensus Estimates Rise

Since the earnings results, the fiscal 2011 and 2012 Zacks Consensus Estimates have risen.

Analysts see earnings growth of 21% in fiscal 2011 as the Zacks Consensus jumped to $1.57 from $1.44 in the last 60 days.

In 2012, growth is expected to slow to just 8% with the Zacks Consensus climbing to $1.69 from $1.57 per share.

CGI Group is expected to report second quarter results on Apr 27.

Shares Soar, But There’s Still Value

Shares of CGI have been hot off the 2009 lows and are now trading at 10 year highs.

But even with the red-hot share price, shares have value.

In addition to an attractive P/E ratio under the average of the S&P 500, the company also has a price-to-book ratio of just 2.2.

With a low P/E and high growth rates, CGI has a PEG ratio of 0.95, which indicates value as it is under 1.0.

The company also has a solid 1-year return on equity (ROE) of 18.5%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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