"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), Oracle ( ORCL), Dell ( DELL) and Cisco ( CSCO) will be obvious benefactors of a tech-investment rebound. But so will firms that help companies maximize their returns and streamline their computer systems. 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). TheStreet.com 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.
The shares trade at a discount to the information-technology services industry based on its earnings, sales, book value and cash flow. With a price-to-earnings ratio lower than 10, CGI is 63% cheaper than its peers and a worthy investment for value-oriented investors. The stock currently trades at just 1.25 times book value. After a three-month rally that benefited technology stocks in particular, many investors are becoming wary of high prices. They're beginning to fear that economic growth and corporate profits will be modest in the second half of 2009. CGI has proved it can stay profitable in the most trying conditions. If you're looking for a stock that offers value and growth regardless of economic conditions, CGI is worth considering. TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.