CGI Inc. (NYSE: GIB) Outlook Still on Hold Amidst Client Uncertainty
CGI Inc., a provider of consulting and outsourcing services to organizations worldwide, remains a Hold due to ongoing client hesitancy in the consulting industry. Despite its large outsourcing segment, which provides stability, CGI’s valuation appears full at its current price of around $106.
M&A opportunities may emerge as the consulting industry experiences stress, but the slow current period persists, requiring careful management decisions. The global digital transformation consulting market is expected to grow significantly, but uncertain client spending limits short-term growth for CGI.
CGI reports revenue via two segments: Systems Integration & Consulting and Outsourcing Revenue. The company generates a larger amount of its revenue from outsourcing services, which have also proven more stable than its Systems Integration & Consulting segment.
While CGI’s total revenue and operating income have grown year-over-year, its earnings per share have trended lower since mid-2023. Compared to the SPDR S&P Software & Services ETF’s gain of 23.37% in the past 12 months, GIB has risen only 7.42%.
CGI’s Quant Score, which measures its financial health and growth potential, is Buy – 3.61. However, I remain Neutral on CGI due to the uncertain macro environment and client spending concerns. Management will need to proceed carefully and focus on accretive acquisition opportunities to drive growth.
