Constellation Software (CSU) AI Stock Analysis

• Market Cap: C$98.85B
• Dividend Yield: 0.13%
• Average Volume (3M): 47.00K
• Price to Earnings (P/E): 98.7
• Beta (1Y): 1.10
• Revenue Growth: 21.56%
• EPS Growth: 31.90%
• Country: CA
• Employees: 45,000
• Sector: Technology
• Sector Strength: 40
• Industry: Software - Application
• EPS (TTM): 47.40
• Shares Outstanding: 21,191,530
• 10 Day Avg. Volume: 47,641
• 30 Day Avg. Volume: 47,001
• PEG Ratio: 3.09
• Price to Book (P/B): N/A
• Price to Sales (P/S): 9.22
• Price to Cash Flow (P/CF): 33.90
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: C$5,480.00
• Price Target Upside: 17.48% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 5

Constellation Software's stock score is driven by strong financial performance, including consistent revenue growth and efficient cash flow management. However, the high P/E ratio and low dividend yield point to a high valuation, which may deter new investors. The technical analysis indicates a bearish trend, suggesting cautious optimism in the near term. The corporate events do not significantly alter the score as they are accounted for in financial and technical analyses.

Positive Factors

Financial Performance

Cash flow showed a significant increase, strengthening the company's financial position.

Management

Constellation is considered very well-managed with a strong balance sheet, mitigating potential risks.

Mergers and Acquisitions

M&A was stronger than expected, indicating a proactive growth strategy by the company.

Negative Factors

Expectations

CSU missed on revenues and EPS, with the miss uniquely due to elevated expectations.

Growth Challenges

Slight organic recurring revenue deceleration could indicate potential challenges in maintaining consistent growth.

Revenue

Revenue and EBITDA were 1% light compared to consensus.

Constellation Software Business Overview & Revenue Model

Company Description

Constellation Software Inc., together with its subsidiaries, acquires, builds, and manages vertical market software businesses in Canada, the United States, the United Kingdom, and rest of Europe. Its industry specific software businesses provide specialized and mission-critical software solutions. The company serves public and private sector markets. Constellation Software Inc. was incorporated in 1995 and is headquartered in Toronto, Canada.

How the Company Makes Money

Constellation Software makes money primarily through the acquisition and management of vertical market software companies. Its revenue model revolves around purchasing and integrating these businesses, which typically offer specialized software solutions that cater to niche markets. These acquired companies generate income through software licensing, maintenance, support services, and, in some cases, SaaS subscriptions. Constellation Software benefits from its decentralized structure, allowing acquired companies to maintain their operational autonomy while leveraging Constellation's resources and expertise to improve efficiency and growth. Additionally, the company's strategic acquisitions help to expand its portfolio, increase market reach, and enhance revenue streams. The diverse nature of its vertical markets and the mission-critical nature of the software solutions provided contribute significantly to stable, recurring revenue, and long-term profitability.

Constellation Software Financial Statement Overview

Summary

Constellation Software demonstrates strong financial health with consistent revenue growth and efficient cash flow management. The company maintains high profitability margins and operational efficiency, although its high debt levels pose potential risks. Overall, the financials depict a company with a strong growth trajectory and sound operational practices, albeit with some leverage-related risks.

Income Statement

Constellation Software has showcased consistent revenue growth over the years, with a remarkable year-over-year increase of 19.76% from 2023 to 2024. The Gross Profit Margin stands strong at 88.81% in 2024, indicating efficient cost management. Although the Net Profit Margin is at 7.26%, which is moderate, the absence of EBIT in 2024 could be a concern for future profitability analysis. The EBITDA Margin of 24.69% suggests healthy operational efficiency.

Balance Sheet

The company's Debt-to-Equity Ratio of 1.62 in 2024 highlights a higher reliance on debt financing, which could be risky in volatile markets. However, a Return on Equity of 26.16% indicates strong profitability relative to shareholder equity. The Equity Ratio at 21.73% suggests that a significant portion of the company’s assets is financed by equity, which is a stable position.

Cash Flow

Constellation Software shows robust cash flow management, with a Free Cash Flow growth rate of 22.57% from 2023 to 2024. The Operating Cash Flow to Net Income Ratio of 3.00 suggests that the company generates substantial cash from operations relative to its net income. The Free Cash Flow to Net Income Ratio of 2.91 further emphasizes strong cash-generating capabilities, ensuring liquidity and flexibility.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
10.07B	8.40B	6.62B	5.11B	3.97B
	Gross Profit
8.94B	7.44B	5.86B	4.58B	3.54B
	EBIT
0.00	1.18B	764.00M	436.00M	656.00M
	EBITDA
2.48B	1.45B	1.63B	1.07B	1.15B
	Net Income Common Stockholders
731.00M	565.00M	512.00M	168.00M	436.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.99B	1.30B	926.00M	802.00M	767.00M
	Total Assets
12.86B	10.90B	7.88B	5.77B	4.38B
	Total Debt
4.53B	3.68B	2.29B	1.39B	725.00M
	Net Debt
2.55B	2.40B	1.48B	624.00M	-33.00M
	Total Liabilities
9.58B	8.94B	5.95B	4.25B	3.33B
	Stockholders Equity
2.79B	1.88B	1.71B	1.06B	1.05B
Cash Flow		Free Cash Flow
2.13B	1.74B	1.26B	1.27B	1.16B
	Operating Cash Flow
2.20B	1.78B	1.30B	1.30B	1.19B
	Investing Cash Flow
-1.57B	-1.64B	-1.69B	-1.24B	-512.00M
	Financing Cash Flow
114.00M	316.00M	483.00M	-41.00M	-247.00M

Constellation Software Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 4664.75
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CSU, the sentiment is Negative. The current price of 4664.75 is above the 20-day moving average (MA) of 4583.11, below the 50-day MA of 4754.82, and above the 200-day MA of 4449.96, indicating a bearish trend. The MACD of -54.29 indicates Positive momentum. The RSI at 42.68 is Neutral, neither overbought nor oversold. The STOCH value of 29.35 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:CSU.

Constellation Software Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
KXS	68 Neutral	C$4.81B	157.81	-0.10%	―	14.85%	-105.25%
CMG	66 Neutral	C$609.21M	24.67	33.92%	2.96%	32.49%	-0.20%
CSU	63 Neutral	C$98.85B	98.71	30.90%	0.13%	21.56%	31.90%
Sector *	57 Neutral	$20.24B	9.51	-13.28%	2.72%	5.43%	-24.54%

Constellation Software Corporate Events

Constellation Software and Subsidiaries Announce Virtual Annual Meetings

Constellation Software Inc., along with its subsidiaries Topicus.com Inc. and Lumine Group Inc., announced their upcoming annual general meetings scheduled for May 13, 2025, which will be conducted virtually via live audio webcast. Shareholders will have the opportunity to participate in a joint question and answer session with senior management following the meetings. This approach reflects the companies’ ongoing commitment to engaging with stakeholders and adapting to digital formats, potentially enhancing shareholder participation and transparency.

Spark’s Take on TSE:CSU Stock

According to Spark, TipRanks’ AI Analyst, TSE:CSU is a Neutral.

Constellation Software’s stock score is driven by strong financial performance, including consistent revenue growth and efficient cash flow management. However, the high P/E ratio and low dividend yield point to a high valuation, which may deter new investors. The technical analysis indicates a bearish trend, suggesting cautious optimism in the near term. The corporate events do not significantly alter the score as they are accounted for in financial and technical analyses.

To see Spark’s full report on TSE:CSU stock, click here.

Constellation Software to Release Q4 Results and Enhance Investor Engagement

Constellation Software Inc., a company specializing in vertical market software businesses, announced it will release its fourth quarter results on March 7, 2025. The company will provide the results on its website and the SEDAR website after market close, opting out of the traditional conference calls. Instead, Constellation has implemented an online Q&A platform for shareholders to submit questions, aiming to enhance investor access to company information and strategies.

Constellation and Topicus Bolster Stake in Asseco Poland

Constellation Software Inc. and Topicus.com Inc. have announced that Topicus’ subsidiary, Yukon Niebieski Kapital B.V., has agreed to purchase 12,318,863 treasury shares from Asseco Poland S.A., representing 14.84% of its share capital, at PLN 85 per share. This strategic transaction will enhance Topicus’ influence in Asseco as it follows a previous acquisition of 9.99% shares and is supported by a shareholders’ agreement with the Adam Góral Family Foundation, pending regulatory approvals.

Constellation Software Announces New Interest Rate for Debentures

Constellation Software Inc. announced a reset of the interest rate for its Series 1 unsecured subordinated floating rate debentures to 8.9% per annum, effective March 31, 2025. This adjustment, which is calculated based on the Consumer Price Index plus a margin, impacts stakeholders by potentially altering investment attractiveness due to the decrease from the current 10.4% rate.

Topicus.com Expands European Reach with Acquisition of Cipal Schaubroeck

Topicus.com Inc., through its subsidiary Total Specific Solutions, has entered into an agreement to acquire all shares of Belgium-based Cipal Schaubroeck NV, a software provider for local governments. This acquisition, expected to finalize in the first quarter of 2025, positions Topicus to strengthen its presence in the European software market, particularly in the public sector, and expands its portfolio with a company generating annual revenues of approximately €110 million.