CSU CN

Constellation Software Inc

TMT


Presented:09/24/2018
Price:CA$949.51
Cap:$16.08B
Current Price:CA$4,409.78
Cap:$74.70B

Presented

Date09/24/2018
PriceCA$949.51
Market Cap$16.08B
Ent Value$17.21B
P/E Ratio59.84x
Book ValueCA$41.35
Div Yield0.55%
Shares O/S21.19M
Ave Daily Vol44,963
Short IntN/A

Current

PriceCA$4,409.78
Market Cap$74.70B
Constellation Software, Inc. operates as holding company that engages in the development of software solutions. It acquires, manages and builds vertical market software businesses that provide mission critical software solutions. The company operates through following segments: Public Sector and Private Sector. The Public Sector segment focuses on government and government-related customers. The Private Sector segment includes business units focused primarily on commercial customers. Constellation Software was founded by Mark Henri Leonard on August 23, 1995 and is headquartered in Toronto, Canada.

Publicly traded companies mentioned herein: Constellation Software Inc/Canada (CSU CN)

Highlights

The presenter is long shares of Constellation Software (CSU CN) due to his faith in “the best management team (led by founder, President & Chairman Mark Leonard)” that he has invested in within the software sector. The company’s M&A model should allow it to continue to exceed the target IRR (25%) on deals, and when this is spread across hundreds of small acquisitions each year earnings could compound at 25%+ per year. With an unlevered balance sheet to work with, and extremely “clean” financials (there’s no stock based comp), the risk of a material earnings miss is low. Some quarters may be lumpy, depending on deal activity and timing, but any share price weakness should be viewed as a buying opportunity. With the stock trading at ~C$940 and earnings reported in USD the math can be a little tricky, but longer-term he believes the stock would be more fairly valued at a high 20s - 30 times multiple to EPS. Today, the presenter sees the stock trading at 17x his 2020 EPS forecast of $44, which is ~10% ahead of Street estimates in the same period.

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Idea Discussion

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