Reviewing CGI Group (NYSE:GIB) & Formula Systems (1985) (NASDAQ:FORTY)

CGI Group (NYSE:GIB) and Formula Systems (1985) (NASDAQ:FORTY) are both computer and technology companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.

Insider and Institutional Ownership

66.7% of CGI Group shares are owned by institutional investors. Comparatively, 34.8% of Formula Systems (1985) shares are owned by institutional investors. 9.9% of CGI Group shares are owned by insiders. Comparatively, 23.3% of Formula Systems (1985) shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility and Risk

CGI Group has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500. Comparatively, Formula Systems (1985) has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500.

Valuation & Earnings

This table compares CGI Group and Formula Systems (1985)”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CGI Group	$10.79 billion	2.13	$1.24 billion	$5.49	18.65
Formula Systems (1985)	$2.76 billion	0.73	$79.67 million	$5.22	25.33

CGI Group has higher revenue and earnings than Formula Systems (1985). CGI Group is trading at a lower price-to-earnings ratio than Formula Systems (1985), indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for CGI Group and Formula Systems (1985), as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CGI Group	0	1	2	2	3.20
Formula Systems (1985)	0	0	0	0	0.00

CGI Group presently has a consensus target price of $156.75, indicating a potential upside of 53.11%. Given CGI Group’s stronger consensus rating and higher possible upside, research analysts clearly believe CGI Group is more favorable than Formula Systems (1985).

Dividends

CGI Group pays an annual dividend of $0.43 per share and has a dividend yield of 0.4%. Formula Systems (1985) pays an annual dividend of $0.63 per share and has a dividend yield of 0.5%. CGI Group pays out 7.8% of its earnings in the form of a dividend. Formula Systems (1985) pays out 12.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

This table compares CGI Group and Formula Systems (1985)’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CGI Group	11.53%	18.86%	10.47%
Formula Systems (1985)	2.91%	6.00%	2.82%

Summary

CGI Group beats Formula Systems (1985) on 13 of the 17 factors compared between the two stocks.

About CGI Group

CGI Inc., together with its subsidiaries, provides information technology (IT) and business process services. Its services include the business and strategic IT consulting, systems integration, and software solutions. The company also provides application development, modernization and maintenance, holistic enterprise digitization, automation, hybrid and cloud management, and business process services; intellectual property-based solutions; business consulting; managed IT services; and IT infrastructure services. It serves clients operating in government, banking and capital market, health, utility, communication and media, oil and gas, space, manufacturing, insurance, life sciences, retail and consumer service, and transportation and logistics sectors. The company operates in Canada, France, Spain, Portugal, the United States, Germany, Sweden, Norway, the United Kingdom, Australia, Finland, Poland, Baltics, the Netherlands, Denmark, Czech Republic, India, the Philippines, Asia Pacific, and internationally. Western and Southern Europe; Australia; Scandinavia; Finland, Poland, and Baltics; the United States; the United Kingdom; and the Asia Pacific. The company was formerly known as CGI Group Inc. and changed its name to CGI Inc. in January 2019. CGI Inc. was founded in 1976 and is headquartered in Montreal, Canada.

About Formula Systems (1985)

Formula Systems (1985) Ltd., through its subsidiaries, provides proprietary and non-proprietary software solutions, IT professional services, software product marketing and support, computer infrastructure and integration solutions, and learning and integration worldwide. The company offers computer and telecommunication infrastructure solutions; and sells and markets computers and peripheral equipment, and cloud based solutions and services relating to databases and big data. It also provides customer relations management, computer systems management infrastructures, web world content management, database and data warehouse mining, application integration, database and systems, data management, and software development tools; and application and professional training courses, and advanced professional studies. In addition, the company offers property and casualty insurance platforms, such as Sapiens, Sapiens CoreSuite, Sapiens IDITSuite, and IDIT Go; life, pension, and annuities platforms, including Sapiens, Sapiens CoreSuite, Sapiens UnderwritingPro, Sapiens ApplicationPro, Sapiens IllustrationPro, and Sapiens ConsolidationMaster; Sapiens Cloud-based DigitalSuite; data and analytics platform; and reinsurance software solutions comprising Sapiens ReinsuranceMaster, Sapiens ReinsurancePro, and Sapiens Reinsurance GO. Further, it provides Sapiens workers' compensation solutions; Sapiens medical professional liability solutions; financial and compliance solutions, such as Sapiens FinancialPro, Sapiens Financial GO, Sapiens StatementPro, Sapiens CheckPro, and Sapiens Reporting Tools; Sapiens Decision; and technology-based solutions. Additionally, it offers application development and business process integration platforms; vertical software solutions; strategic consulting and outsourcing services; and professional services in various areas, as well as develops on-premise payroll software. The company was incorporated in 1985 and is headquartered in Or Yehuda, Israel.