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Quality Equities

Quality Equity Investor, Concentrated Portfolios

13 May, 11:52Latest

Constellation Software's Q1 headline growth overstates the underlying business, making the AI update at the May 15 meetings the key test. Revenue rose 20% to $3.18bn, but organic growth was 6%, or 2% in constant currency. Free cash flow to shareholders jumped 44% to $733m, yet about $170m of the gain came from a non-cash revaluation swing, leaving underlying growth near mid-single digits at about 76x earnings. What matters is whether AI gains become pricing power and faster organic growth. x.com

CSU.TO

26 Apr, 12:39

Constellation Software offers a rare entry point into one of the most disciplined capital allocators ever built. Unlike most serial acquirers, which drift into big, mediocre deals as they grow, it has deployed over $7 billion in acquisitions since 2023 while keeping adjusted ROIC above 20%. Capital allocation is spread across six operating groups and hundreds of ROIC-incentivized managers. New PEMS forever-stakes in public companies and a valuation near 16x FCF add to the setup. x.com

CSU.TO

Mindset for Money

CPA, Financial Analyst, Former Big Four Auditor

7 Oct

CSU.TO

Constellation Software is a good opportunity in a market said to have none, because it has doubled free cash flow available to shareholders while its market cap has gone nowhere. x.com

Techquity

Technology Investor, Fundamental Research

8 Oct

CSU.TO

Constellation Software is finally at a fair valuation, making it a good time to accumulate. It has three big opportunities: new types of investments such as small stakes in public companies, adding AI to its thousands of software products at little extra cost, and buying small software companies in Asia and other less competitive regions. x.com

Jared Sleeper

Partner & Head of Software at Avenir, Startup Investing

12 May

CSU.TO

Constellation Software has no way to benefit from AI and little organic growth, so 21x GAAP EBIT looks fair, with perhaps a downside skew if churn rises across its portfolio in the next five years. The market's negative reaction is rational. Its small vertical software businesses were run financially rather than for product, many still on-prem, with no central AI strategy as software gets cheaper to build. Organic growth was 2% in constant currency; inorganic growth is fundamentally different. … Show more

Trevor Scott

Founder & Portfolio Manager of Tidefall Capital Management

26 Oct

CSU.TO

Constellation Software offers the same growth rate as ServiceNow at half its multiple when ServiceNow's after-tax stock-based compensation is factored in. x.com

Leandro

Equity Analyst at Best Anchor Stocks

12 Aug

CSU.TO

Constellation Software's post-earnings selloff is myopic, reflecting a market unwilling to look beyond one quarter. Results are driven by lumpy capital deployed into acquisitions, which analysts can't forecast, so performance must be judged over years rather than against quarterly estimates. This quarter's organic growth deceleration feeds the bear case, but it was not a normal quarter, and management explained it well on the call; the market may stay in show-me mode until Q3. x.com x.com x.com … Show more

Ian Bezek

Investor/Writer, Latin American Equities, Former Analyst at Kerrisdale

30 Mar

CSU.TO

Constellation Software's Sabre deal is one of the dumbest capital allocation decisions in years, enough to reverse a fresh view on the stock in under a month. Constellation should be buying smaller, solvent companies. x.com x.com

Rohit Mittal

CEO of Helium Ventures, VC-Backed Company Acquisitions

20 Sep

BSP

CSU.TO

Bending Spoons' growth is bought on credit, while Constellation Software can deleverage quickly, and valuations should eventually reflect that. Both grow just 3-5% organically, and Bending Spoons' organic rate halved twice (13% to 6% to 3%). Yet Bending Spoons trades at 19x FY25 sales versus 3.8x, with net debt at 3.1x revenue versus 0.2-0.4x and interest at 11% of revenue versus 2.6%. Bending Spoons needs the next deal to pay for the previous one. x.com

rubicon59

Technology & Semiconductor Equity Commentary

14 Mar

CSU.TO

LMN.V

TOI.V

Constellation Software and its spin-offs Lumine Group and Topicus.com are among the few software companies run for shareholders' benefit, which assures a good outcome if they are bought at modest valuations. Under 20 times earnings is reasonable, but no more. x.com x.com

ARENA MAN CAPITAL

Engineer & Private Investor, Asian Equities

19 May

CSU.TO

Constellation Software remains the gold standard of not doing dumb things, and half the game is owning companies that avoid them. Takeaways from its AGM: it is firing on all cylinders, it has its own inference hardware and hosted models, and AI may let it charge more for new features and underwrite higher IRRs faster than rivals, though it may also raise attrition. Harris's Bender sees a possible wave of competition, but none has appeared yet. x.com x.com x.com x.com

Trevor Scott

Founder & Portfolio Manager of Tidefall Capital Management

21 May

CSU.TO

TOI.V

Constellation Software and Topicus are being wrongly lumped in with AI software fears, setting them up to rerate back toward a 3% free cash flow yield once things clear. They adapt, execute and take advantage of deals, with record capital deployments, and moats in vertical market software are shifting rather than disappearing; much of software can adapt with the right culture. A post the author replies to counters that new competitors have beaten Harris and Tyler in govtech. x.com x.com x.com

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