CGI a rags to riches story

CGI a rags to riches story

Global IT consulting giant logs impressive growth record


For companies that don’t pump oil or supply natural gas, 2022 was probably a tough year. Apart from energy, most TSX sub-indexes lost ground.

But some companies are thriving, despite the headwinds of inflation, rising interest rates, fractured supply chains, and the looming possibility of a recession.

One of them is a low-profile Quebec-based firm that many investors aren’t familiar with: CGI Group (TSX: GIB.A). If you haven’t looked at it, now is the time. It’s a classic example of one man’s dream growing from modest beginnings to a global giant.

CGI (the initials stand for “Conseillers en gestion et informatique”) was started by Serge Godin in Quebec City in 1976 (the head office is now in Montreal). He was only 27 years old at the time, and CGI had only two employees.

Today, it’s one of the world’s largest IT consulting firms. Mr. Godin remains the controlling shareholder of the company, is an Officer of the Order of Canada, and was inducted into the Canadian Business Hall of Fame in 2008.

The company’s approach from the outset was to help clients achieve success, offer fulfilling career opportunities for employees, and provide long-term growth for shareholders. In short, win-win. It wasn’t easy. IT was in its infancy at the time, and demand for CGI’s services evolved slowly. By 1986, a decade after it was founded, the company’s annual revenue was only $25 million.

At that point, CGI embarked on a business strategy that eventually made it an international giant. The company acquired rival BST. To finance the deal, CGI went public, issuing 800,000 Class A shares at a price of $6.50.

As globalization took hold, the company extended its operations beyond Canada. By 1996, annual revenue had grown to $122 million.

Growth by acquisition

But CGI was just getting going. Over the next few years, the company made a series of key acquisitions that transformed it into a global powerhouse. They included:

  • A 1998 merger with Bell Sygma that led to the signing of the largest Canadian outsourcing contract of that time, nearly doubling the size of the company.
  • A 2001 merger with IMRGlobal to add Indian operations to the portfolio, providing clients with expanded global delivery options.
  • A 2004 merger with American Management System (AMS). This transaction doubled the size of CGI in the United States and tripled the size of its presence in Europe.

By 2006, annual revenue was up to $3.5 billion.

In 2012, CGI made its largest acquisition to date, merging with the Anglo-Dutch business and technology services company Logica. The acquisition increased the size of CGI’s staff to 68,000 from 31,000 and offered greater presence, service capabilities, and expertise for clients across the Americas, Europe, and Asia. This made CGI the world’s fifth-largest independent IT and business consulting services firm.

By the end of fiscal 2016, CGI’s annual revenue had reached $10.7 billion.


The company continues to grow, with at least one major acquisition every year. Revenue in the 2022 fiscal year was $12.87 billion. The company now employs 90,000 people worldwide.

And it’s still growing. First quarter results for the 2023 fiscal year were released on Feb. 1, and they beat estimates. Revenue was $3.45 billion, up 12.3% on a constant currency basis over the year before. Net earnings were $382.4 million ($1.60 per diluted share). On a per share basis, that was up 7.4% over the same period of fiscal 2022.

The company reported bookings of $4.04 billion, for a book-to-bill ratio of 117%. The backlog is just over $25 billion, or 1.9 times annual revenue.

CEO George D. Schindler commented: “Our ongoing investments continued to deliver value for all of our stakeholders, notably in our strong positioning as a trusted partner for clients’ digitization priorities, which contributed to generating over $4 billion in bookings during the quarter, of which one-third were new business.”

The only significant negative about this stock is that it does not pay a dividend, despite its healthy bottom line. The directors prefer to use cash flow for more acquisitions, rather than distribute it to shareholders. However, CGI does reinvest in its own shares. During the latest quarter, the company spent $10.3 million to repurchase and cancel just over 100,000 shares at an average cost of $102.81. CGI renewed its normal course issuer bid for up to 18.8 million Class A shares.

As for the investment outlook: The record speaks for itself. CGI is tracked in my Internet Wealth Builder newsletter and was initially recommended in 2012 at $24.42. The stock closed recently at $125.58. That’s an average annual growth rate of over 17%.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website. To take advantage of a 50% saving on a trial subscription and receive the special report “The Tumultuous Twenties,” go to

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Content © 2023 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.