Is Expanding U.S. GovTech Adoption Altering The Investment Case For CGI (TSX:GIB.A)?

• In recent weeks, CGI and its U.S. public sector clients have announced a series of milestones, including a new Texas Department of Information Resources contract for CGI’s built-for-government COTS software, San Diego County’s move to CGI Advantage cloud-based Performance Budgeting, and Nevada’s launch of a modernized HR and payroll platform on CGI Advantage.
• Together, these wins highlight CGI Advantage and CGI Transcend as core platforms in state and local government modernization, reinforcing CGI’s role in large-scale digital transformation of public services across multiple jurisdictions.
• We’ll now examine how this expanding U.S. government footprint, especially the broad Texas DIR software contract, influences CGI’s existing investment narrative.

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CGI Investment Narrative Recap

To own CGI, you need to believe its mix of IT services and proprietary government software can steadily grow recurring revenue, even as near term earnings have been flat and returns on equity sit in the mid teens. These U.S. public sector wins, particularly the broad Texas DIR software contract, support the existing thesis but do not fundamentally change the key near term catalyst, which remains execution on the large modernization backlog, or the biggest risk around contract rebids and budget cycles.

Among the recent announcements, the Texas Department of Information Resources contract looks most relevant, as it effectively opens a distribution channel for CGI Advantage and CGI Transcend across multiple U.S. jurisdictions. For investors watching catalysts, this reinforces the importance of CGI’s IP based government platforms within its CA$30.6 billion backlog and could modestly strengthen revenue visibility if agencies adopt these SaaS solutions over time.

Yet while these contracts extend CGI’s reach in U.S. state and local government, investors should also be aware of the risk that...

Read the full narrative on CGI (it's free!)

CGI's narrative projects CA$17.9 billion revenue and CA$2.3 billion earnings by 2028. This requires 4.8% yearly revenue growth and roughly a CA$0.6 billion earnings increase from CA$1.7 billion today.

Uncover how CGI's forecasts yield a CA$155.08 fair value, a 22% upside to its current price.

Exploring Other Perspectives

Seven Simply Wall St Community fair value estimates for CGI span from CA$136.69 to CA$1,382.16, reflecting very different expectations about its long term potential. Against this wide range, the recent U.S. public sector contract wins highlight how reliance on large government deals can both support backlog and expose you to rebidding and political risk, so it is worth comparing several of these viewpoints before forming your own view.

Explore 7 other fair value estimates on CGI - why the stock might be worth over 10x more than the current price!

Build Your Own CGI Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your CGI research is our analysis highlighting 4 key rewards that could impact your investment decision.
• Our free CGI research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate CGI's overall financial health at a glance.

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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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