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Under-the-Radar Tech Stock: CGI Group

"Under-the-Radar Stocks" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

Businesses put technology upgrades on the back burner last year as the economy declined. But recent signs of recovery bode well for spending this year and in 2010.

Microsoft (MSFT - Get Report), Oracle (ORCL - Get Report), Dell (DELL) and Cisco (CSCO - Get Report) will be obvious benefactors of a tech-investment rebound. But so will firms that help companies maximize their returns and streamline their computer systems. Ratings

Montreal-based CGI Group (GIB) is one of the largest independent information-technology and consulting firms in the world, despite having a market capitalization of just $2.6 billion. The company sells systems-integration and cost-reduction services that remain in demand even in a weak economy.

CGI gains from large contracts with major players in financial services, manufacturing, retail, government, health care, telecommunications and utilities. It also has alliances with IBM (IBM), SAP (SAP), Microsoft and Sun Microsystems (JAVA). Ratings upgraded CGI to "buy" on May 19. The company has boosted earnings per share for 10 straight quarters. Revenue rose 2% to C$950 million and earnings climbed 19% to 25 cents in the fiscal second quarter, which ended in March.

The company eliminated nearly $134 million in long-term debt since the prior year's fiscal second quarter. It has also added $104 million in cash and cash equivalents to its balance sheet. CGI's no-dividend policy is an obvious weakness and a common downside of tech companies.

CGI shares have climbed 18% this year, beating the Nasdaq's 15% gain. Despite the strong performance, CGI stock remains undervalued.
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DELL $0.00 0.00%
CGI $16.22 -0.25%
CSCO $27.66 0.45%
MSFT $46.90 0.21%
ORCL $37.45 -0.56%


Chart of I:DJI
DOW 16,893.98 -18.31 -0.11%
S&P 500 1,995.83 +15.91 0.80%
NASDAQ 4,744.1740 -46.9780 -0.98%

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