Q: 1. Could you please provide the link to the blog you recently wrote about CSU.
2. Looking at historical data, CSU was trading at a lower P/E a few years back and more recently hit 120 - double the historical standard of a few years back (prior to 2021). In fact, back in late 2021 the P/E of CSU hit approximately 120, only to return to its historical standard (before starting this new leg up). Is it possible that the stock is resetting itself? A P/E of 120 is fairly high for most companies and it still trades in mid 80s even after this recent drop. Thoughts? Does CSU deserve a P/E of about 120? I am trying to decide if I should add to this stock OR wait a little longer. Thanks.
2. Looking at historical data, CSU was trading at a lower P/E a few years back and more recently hit 120 - double the historical standard of a few years back (prior to 2021). In fact, back in late 2021 the P/E of CSU hit approximately 120, only to return to its historical standard (before starting this new leg up). Is it possible that the stock is resetting itself? A P/E of 120 is fairly high for most companies and it still trades in mid 80s even after this recent drop. Thoughts? Does CSU deserve a P/E of about 120? I am trying to decide if I should add to this stock OR wait a little longer. Thanks.
5i Research Answer:
The blog can be found here: https://www.5iresearch.ca/blog/constellation-software-update-on-artificial-intelligence-ai-and-what-investors-should-know
On P/E, over the last five years, our data shows a range of 50X on the high side and 26X on the low side. Currently, CSU trades at about 28X, a level that we wouldn't view as particularly concerning. Some level of reset to the valuation is likely warranted but we are probably getting close to that level at this stage. For a reference at an extreme, CSU traded at 23X in the trough of COVID. We think CSU is looking fine at these levels but there will likely be a bit more volatility in the short-term as investors re-evaluate things a bit.