CGI Renews Normal Course Issuer Bid: A Prudent Move for Shareholder Value

CGI Group Inc. (TSX: GIB.A) (NYSE: GIB) has announced the renewal of its Normal Course Issuer Bid (NCIB), subject to approval by the Toronto Stock Exchange (TSX). This move allows the company to purchase up to 20,457,737 Class A subordinate voting shares ("Class A Shares"), representing approximately 10% of the Company's public float as of the close of business on January 23, 2024. This decision aligns with CGI's strategic objectives and long-term goals, as discussed in the provided background information.

CGI's management and Board of Directors believe that the purchase for cancellation of the Company's Class A Shares is a proper use of funds, as it provides the flexibility to purchase Class A Shares from time to time as the Company considers it advisable, as part of its efforts to increase shareholder value. This strategic objective is well-aligned with CGI's long-term goal of enhancing shareholder value through various means, such as increasing earnings per share (EPS) and potentially boosting the stock price.

The renewed NCIB allows CGI to manage its capital structure more effectively by repurchasing shares, which can improve its financial performance and flexibility. Additionally, the NCIB can serve as a signal to the market that CGI's management believes the company's stock is undervalued, as they are essentially voting with their wallet by repurchasing shares at the current market price.

CGI's strong financial performance and cash generation capacity support the renewed NCIB. In the first quarter of Fiscal 2025, CGI reported revenue growth of 5.1% year-over-year, with earnings before income taxes up 12.3% and net earnings up 12.5% compared to the same period last year. The company's cash provided by operating activities was $646.4 million, representing 17.1% of revenue. This cash generation capacity supports the NCIB, as the company can use its cash to repurchase shares.

The renewed NCIB also provides an opportunity for CGI to improve the liquidity of its stock by becoming a significant buyer in the market. This can make it easier for other investors to buy and sell shares, potentially attracting more investors and further increasing shareholder value.

In conclusion, CGI's renewed Normal Course Issuer Bid appears to be a prudent move, given the company's strong financial performance and cash generation capacity. The NCIB aligns with CGI's strategic objectives and long-term goals of increasing shareholder value. However, the company should also consider alternative strategies to ensure it is maximizing value for its shareholders.