CGI Inc. (GIB): A Bull Case Theory

Core Thesis - CGI Inc. is positioned as a strong investment opportunity due to its robust financial performance, disciplined capital allocation, and growth potential driven by AI-embedded managed services [1][5]. Financial Performance - Revenue increased by 9.7% year-over-year, with adjusted EPS rising by 10.9%, indicating profitable growth despite temporary margin distortions from restructuring costs [3]. - Bookings reached $4.79 billion, resulting in a 119% book-to-bill ratio, reflecting sustained client demand [3]. - The backlog stood at $31.45 billion, equivalent to two years of revenue, providing visibility for growth over the next 24–36 months [3]. Capital Allocation and Shareholder Value - The company executed a disciplined approach with strategic M&A totaling $1.8 billion and aggressive buybacks amounting to $1.275 billion, enhancing shareholder value [4]. - CGI raised its dividend by 13%, demonstrating confidence in future cash flows [4]. Growth Drivers - AI and managed services are identified as primary growth engines, contributing to efficiencies, higher-margin work, and client renewals [4]. - Free cash flow remains strong at 16.5% of revenue, supporting ongoing investments and shareholder returns [4]. Valuation Metrics - Valuation metrics indicate an attractive stock price with a PE ratio of 16, levels last seen in 2014 and 2020, alongside a 13.6% return on invested capital [5]. - The company’s strong balance sheet and predictable cash generation position it as a classic compounder, offering limited downside and significant upside potential with accelerated AI adoption [5].