Stock Analysis

What You Need To Know About CGI Inc.'s (TSE:GIB.A) Investor Composition

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TSX:GIB.A
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A look at the shareholders of CGI Inc. (TSE:GIB.A) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.

CGI has a market capitalization of CA$26b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about CGI.

See our latest analysis for CGI

ownership-breakdown
TSX:GIB.A Ownership Breakdown December 25th 2020

What Does The Institutional Ownership Tell Us About CGI?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in CGI. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of CGI, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
TSX:GIB.A Earnings and Revenue Growth December 25th 2020

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. CGI is not owned by hedge funds. Caisse de dépôt et placement du Québec is currently the largest shareholder, with 12% of shares outstanding. Distinction Capital is the second largest shareholder owning 10% of common stock, and Jarislowsky, Fraser Limited holds about 3.4% of the company stock.

After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of CGI

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can see that insiders own shares in CGI Inc.. Insiders own CA$506m worth of shares (at current prices). I sometimes take an interest in whether they have been buying or selling.

General Public Ownership

With a 30% ownership, the general public have some degree of sway over CGI. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 10%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for CGI you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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