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Constellation Software
(TSX:CSU)
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Rating:67Neutral
Price Target:
C$3,495.00
▲(31.03% Upside)
Action:Reiterated
Date:05/15/26
The score is driven primarily by strong cash-flow generation and solid operating profitability, partially constrained by leverage and a recent slowdown in growth. Technical signals are neutral-to-weak (negative MACD and price below longer-term averages), while valuation appears fairly full with a low dividend yield. The latest earnings call supports a moderately positive view longer term (active M&A, stable organic growth) but flags near-term margin headwinds.
Positive Factors
Cash Generation
High cash conversion and sustained free cash flow growth create durable internal funding for acquisitions, product development, and shareholder returns. Reliable FCF close to reported net income reduces financing risk for the acquisitive model and underpins long‑term capital allocation flexibility.
Negative Factors
Elevated Leverage
Material leverage reduces financial flexibility and heightens risk if organic performance or deal returns slip. Operating cash flow covers only a modest share of debt (coverage historically ~0.31–0.51x, ~0.41x TTM), constraining the firm's ability to absorb shocks or pursue larger strategic acquisitions without raising costs.
Read all positive and negative factors
Positive Factors
Negative Factors
Cash Generation
High cash conversion and sustained free cash flow growth create durable internal funding for acquisitions, product development, and shareholder returns. Reliable FCF close to reported net income reduces financing risk for the acquisitive model and underpins long‑term capital allocation flexibility.
Read all positive factors
Constellation Software (CSU) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$67.03B
Dividend Yield0.18%
Average Volume (3M)66.01K
Price to Earnings (P/E)49.7
Beta (1Y)0.89
Revenue Growth16.53%
EPS Growth53.02%
CountryCA
Employees69,000
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)44.79
Shares Outstanding21,191,530
10 Day Avg. Volume56,132
30 Day Avg. Volume66,014
Financial Highlights & Ratios
PEG Ratio-3.40
Price to Book (P/B)14.28
Price to Sales (P/S)4.31
P/FCF Ratio19.84
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$3,990.60Price Target Upside49.62% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering8
EPS Forecast (FY)118.32
Revenue Forecast (FY)C$13.85B
Constellation Software Business Overview & Revenue Model
Company Description
Constellation Software Inc., together with its subsidiaries, acquires, builds, and manages vertical market software businesses to develop mission-critical software solutions for public and private sector markets. It is involved in the software lic...
How the Company Makes Money
CSU primarily makes money through recurring and repeat revenue generated by the vertical market software companies it owns. The company’s model is to acquire established niche software vendors—often leaders in a specific vertical—then operate them...
Constellation Software Earnings Call Summary
Earnings Call Date:Aug 11, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Nov 06, 2026
Earnings Call Sentiment Positive
The call highlighted strong execution on M&A (including larger deals and carve-outs), measurable productivity gains from AI adoption in development, improving cohort profitability and substantial cash flow from large assets like Altera. Offsetting items were near-term organic growth softness driven by a few one-off comps and customer losses, short-term profitability volatility from purchase accounting, integration complexity for large deals, and elevated multiples on some transactions. Management expects these issues to normalize and emphasized a long-term verticalization strategy and disciplined IRR targets.Positive Updates
Strong M&A Activity and Deal Flow
Elevated acquisition volume in Q2 and early Q3 including DerbySoft, TouchBistro and Imagine; management sees opportunities across owner-managers, PE portfolios and carve-outs and notes increased availability of larger deals (>$100M). No change to hurdle rates and expected IRRs remain consistent despite higher multiples.
Negative Updates
Organic Growth Deceleration in Maintenance & Recurring Revenue
Maintenance and other recurring revenue organic growth (constant currency) excluding Altera was ~4%, below the historical range of 5%–6%. Management attributes the shortfall to a small number of one-offs and strong Q2 '25 comps rather than broad deterioration.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong M&A Activity and Deal Flow
Elevated acquisition volume in Q2 and early Q3 including DerbySoft, TouchBistro and Imagine; management sees opportunities across owner-managers, PE portfolios and carve-outs and notes increased availability of larger deals (>$100M). No change to hurdle rates and expected IRRs remain consistent despite higher multiples.
Read all positive updates
Company Guidance
Management offered mostly directional (not numeric) guidance: they will not set any AI targets, revenue lines or timelines and will fund AI work locally from business P&Ls; verticalization is a multi‑year effort that won’t show up in next quarter or next year. On growth and portfolio metrics they noted organic maintenance & other recurring revenue was roughly 4% in Q2 (ex‑Altera), below their historical ~5–6% range but expected to normalize toward ~5% once one‑offs (Altera, Dark Matter, Lumine and a lost South American customer that shaved ~30 bps) unwind; Altera (acquired May‑2022) has ~ $646m TTM revenue, has generated ~ $400m cumulative free cash flow since acquisition and is expected to be a “slow shrinker” for a year or two after a strong Q2‑2025 comp (+1%). On M&A they continue to pursue larger deals ($100m–several‑hundred‑million), cited DerbySoft as ~ $100m revenue for ~$400m consideration, said hurdle rates/IRR targets are unchanged, and reported cohort profitability moving higher (2026 cohort from –16% in Q1 to +16% in Q2; 2025 cohort up to ~20% from ~16–17%; older cohorts in the high‑20s/30s). Other operational guidance: current tax is running in the mid‑20s (%) of adjusted income, headcount reductions are not a focus, and AI/token costs are being tracked in new GL accounts and are not materially affecting results today.Constellation Software Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
64
Positive
Cash Flow
83
Very Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 12.55B | 11.83B | 10.07B | 8.41B | 6.62B | 5.11B |
| Gross Profit | 5.02B | 4.68B | 3.62B | 2.95B | 2.32B | 1.88B |
| EBITDA | 3.16B | 2.59B | 1.97B | 1.60B | 1.25B | 1.11B |
| Net Income | 949.60M | 520.96M | 731.00M | 565.00M | 512.00M | 310.00M |
Balance Sheet | ||||||
| Total Assets | 17.59B | 16.14B | 12.86B | 10.78B | 7.95B | 5.71B |
| Cash, Cash Equivalents and Short-Term Investments | 2.89B | 3.14B | 1.99B | 1.29B | 935.08M | 794.46M |
| Total Debt | 5.82B | 5.78B | 4.53B | 4.46B | 2.31B | 1.38B |
| Total Liabilities | 12.72B | 11.88B | 9.57B | 8.84B | 6.00B | 4.21B |
| Stockholders Equity | 4.12B | 3.57B | 2.79B | 1.86B | 1.73B | 1.05B |
Cash Flow | ||||||
| Free Cash Flow | 2.71B | 2.57B | 1.89B | 1.63B | 1.15B | 1.22B |
| Operating Cash Flow | 2.79B | 2.64B | 1.95B | 1.68B | 1.19B | 1.24B |
| Investing Cash Flow | -2.67B | -1.97B | -1.52B | -1.67B | -1.65B | -1.22B |
| Financing Cash Flow | 212.38M | 358.16M | 277.98M | 456.28M | 540.42M | -983.21K |
Constellation Software Technical Analysis
Positive
2667.24
Price Trends
2896.26
Positive
2718.81
Positive
2847.19
Positive
Market Momentum
101.88
Negative
54.13
Neutral
43.15
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CSU, the sentiment is Positive. The current price of 2667.24 is below the 20-day moving average (MA) of 2986.52, below the 50-day MA of 2896.26, and below the 200-day MA of 2847.19, indicating a bullish trend. The MACD of 101.88 indicates Negative momentum. The RSI at 54.13 is Neutral, neither overbought nor oversold. The STOCH value of 43.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:CSU.
Constellation Software Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | C$4.76B | 39.86 | 20.88% | ― | 15.99% | 252.03% | |
74 Outperform | C$952.59M | 12.93 | 11.97% | 7.51% | -4.08% | -7.65% | |
73 Outperform | C$9.22B | 37.52 | 11.26% | ― | 11.62% | 19.63% | |
70 Outperform | C$8.39B | 5.43 | 28.29% | 4.81% | 0.54% | 54.92% | |
67 Neutral | C$67.03B | 49.68 | 25.24% | 0.21% | 16.53% | 53.02% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
61 Neutral | C$1.98B | -15.24 | -6.60% | ― | 10.59% | 84.91% |
* Technology Sector Average
TSE:CSU
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.