$25B great performing monster stock that almost no one ever talks about. 3


 

As I gain more experience with the markets, the more I find myself puzzled.

How come no one ever talks about this beautiful performer that has been delivering year after year over last decade or so?

Is it because this company never paid dividend?

Is it because people do not even know whether this company exists and being traded in TSX?

Why are Canadian retail investors far more into Canadian banks or weed stocks than this beautiful monster?

 

In beginning of 2010, its market cap was only $4.1B which grew into its current market cap of $25B for 9 years.

That means this monster performed 25% every year on average.

I like Canadian banks for their moat and they have delivered 15% last 10 years. Great performance but not even close to the beautiful beast.

 

 

 

What is the name of the company?

It is CGI group.

 

Yeah. I can hear you booing and picture your two thumbs downs.

Who the heck cares when Shopify has been growing over 50% on average every year last several years?

Well that’s so true and I can only blame myself for missing the boat.

Maybe Shopify is just getting started and I still have a chance.

However I can give you my typical excuse for not being invested in Shopify – lack of predictability and maybe hard to figure out or value.

Many times revenue growth is an amazing indicator which can be translated into earnings and cash flows but I am just not smart enough to understand it or lazy to research further.

Maybe I will put my gambling money. Or Shopify will show more predictable cash flow at some point so that I can be more interested.

 

 

Can you see what’s happening here?

CGI is just too boring even for me to talk about that I got sidetracked.

 

What can I say. Blame CGI. Not me.

 

What a beautiful chart. Hard to find a better looking chart than CGI’s last 10 years elsewhere.

 

I don’t know whether I even want to talk about their fundamentals here.

Let me talk about a couple of points quickly in unorganized manner.

CGI made a gigantic acquisition in 2012-2013 year which doubled its revenue from $5B to $10B.

What’s funny is that since then they have been integrating the acquisition, doing very small tuck-in acquisitions, paying down their debt and buying back their own shares regardless where the share prices have been trading.

Sounds familiar?

Yes. Just like Dollarama.

I like so many things about Dollarama except their buybacks programs when their shares were traded at almost constantly all time high for years. Then it crashed back down. Hahaha

I guess you can’t have perfect company.

 

Another thing to note about CGI is that their revenue only grew 15% over 6 years from $10B 6 years ago to $11.5B now.

They just spent time integrating and squeezing the milk out as their EPS has been growing from $1.40 per share to $4 per share for the same time period of 6 years. Not bad huh?

My preference for a good stock would be growing top and bottom lines together so CGI won’t be one of my top tier stocks but its performance and predictability should not be understated.

 

As of now, it has been hitting all time highs. Not sure how long it will last but hitting an all time high is a great sign that the company is doing something right.

The debt level is pretty reasonable. 1.5 times cash flows.

It just incurred debt to buyback shares in December when the entire markets were down so I guess I should feel ok about that.

I hope it does another sizable acquisitions. They proved themselves that they can execute major acquisitions.

Many people say there is tailwind on IT consulting service due to many companies moving their legacy systems to cloud based systems which could be a plus.

Would I be a buyer at this price level? Probably not because I got in when it was like around $60… but if you are thinking of next 5-10 years. This is a solid company (that no one ever talks about).

 

The biggest challenge?

Resisting boredom…

 

 

 

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3 thoughts on “$25B great performing monster stock that almost no one ever talks about.

  • Penetrator

    I own CGI since 2011 or 2012. I was never excited nor bored with it. It always seemed like a quiet and steady stock. The kind of stock that just stays on a portfolio for many many years.

    • Nico

      ARE YOU THE HONORABLE MASTER PENETRATOR?
      You and BSR are my favorite and and helped me save and buy great stocks.
      Your word choice like douchebags and sense of humor brings back my high school memory.

      CGI is steady eddy. For sure unpopular.