CGI (TSX:GIB.A): Valuation Check After Texas DIR Win Boosts U.S. Public Sector SaaS Momentum

CGI (TSX:GIB.A) just secured a new contract with the Texas Department of Information Resources, giving public agencies streamlined access to its government focused SaaS tools and services. For investors, this quietly strengthens CGI's U.S. public sector pipeline.

See our latest analysis for CGI.

The Texas win caps a busy stretch of U.S. public sector deals and cloud milestones. Yet CGI's year to date share price return of around minus 21% and one year total shareholder return of roughly minus 22% show sentiment has lagged fundamentals, hinting that momentum could improve if contract flow keeps translating into earnings growth.

If this government SaaS momentum has your attention, it might also be a good time to see what other digital leaders are doing across tech and AI via high growth tech and AI stocks.

Yet with revenue and earnings still growing, a double digit discount to analyst targets and solid long term returns, investors have to ask: is CGI quietly undervalued, or is the market already pricing in its next leg of growth?

Most Popular Narrative Narrative: 19.5% Undervalued

Against CGI's last close of CA$124.80, the most followed narrative points to a fair value around CA$155, implying meaningful upside if its thesis proves accurate.

The company's robust $30.6 billion backlog, increasing book to bill ratios in higher growth segments (especially IP and managed services), and active pipeline of large digital modernization/legacy transformation projects position CGI for long term revenue visibility and sustained free cash flow generation.

Read the complete narrative.

Curious how steady growth, rising margins and a richer earnings multiple supposedly line up to justify that upside case? The narrative leans on quietly ambitious forecasts for revenue, profitability and valuation, all converging in a way that could re rate the shares if execution stays on track. Want to see exactly which assumptions are doing the heavy lifting behind that target fair value?

Result: Fair Value of CA$155.08 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this upside view hinges on organic growth reaccelerating, with ongoing macro uncertainty and integration challenges still capable of derailing the story.

Find out about the key risks to this CGI narrative.

Build Your Own CGI Narrative

If you see the story differently, or simply want to dig into the numbers yourself, you can build a custom view in minutes, Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding CGI.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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