Review of Constellation Software Inc
APR 03, 2025 - The company has been really innovative in the capital allocation playbook by switching to spinning out “mini Constellations”, which encourage not only entrepreneurship but also autonomy and operational efficiency at the managerial level. Software businesses have limited exposure to tariffs and geopolitical uncertainty. Despite a challenging operating environment of a potential recession, CSU’s portfolio of businesses is expected to continue to do well due to the recession-proof nature of VMS businesses. CSU is a high-quality name to own amid a volatile market that balances both upside potential and downside protection. We think CSU will compound capital just fine over time. However, given its current market capitalization of more than $100 billion and an all-time high in multiple valuations, the compounding effect will be decent but not as impressive as it used to be, which investors need to have a realistic expectation. We think the investment thesis in CSU as a long-term compounder remains unchanged, we are maintaining our rating at “A”.
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Constellation Software Inc. (CSU)
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Topicus.com Inc. (TOI)
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Lumine Group Inc. (LMN)
- What was the catalyst in mid-2024 that finally created a break-out in stock price?
- Why is it such a high-conviction 5i Research stock now compared to back a few years ago ?
- Do we know anything about the quality of management?
- What is the quality of the balance sheet ?
- How out of line is the current valuation of this stock ?
- Does it have similar runway potential that a LMN and TOI might have (with reference to success of CSU) ? ......acknowledging of course that they are in different sectors.
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