Constellation Software Inc. (TSX:CSU) is a software and computer services company that is primarily focused in acquiring, managing, and developing vertical market software businesses. The company has over 30,000 customers in over 30 countries.
Constellation caters to both public and private sectors of the economy through a number of subsidiary companies. The public sector arm of the business includes Volaris Group, Harris operating Group, and Vela Software Group. The private sector includes Homebuilder Operating Group, Jonas Operating Group, and the Vela Software Group.
Canada has always been a hotbed for growing technology companies. What makes Constellation a part of this exclusive club? Let’s take a look at a few reasons that set Constellation apart from the pack and why you should add this company to your portfolio.
Stellar performance and growth
Constellation currently trades just over $562, which is below the 52-week high of $598. While this may seem like an expensive stock to own, the growth rates are what really make this stock attractive.
The stock is currently up by 62% year-to-date, with the number only improving over the course of a full year to 105%. Long-term investors will be happy with the five-year increase—an impressive 1,178% over the current price. Adding to this, Constellation pays out a quarterly dividend of $1.00 per share.
In the most recent quarter, revenue grew by 7% to $444 million. This is in comparison with the same quarter last year, which saw revenue of $416 million. Adjusted net income increased 23% to $80 million, which was an increase from the $65 million reported in the same quarter last year. Cash flows from operations also increased by 46% over the same quarter last year to $64 million.
Analysts currently issue a hold recommendation on the stock, with price targets up to $580.
Growth through acquisitions
Constellation is well known for acquiring companies to expand the already impressive portfolio, often branching out into new sectors where the opportunity exists. Some of the more recent acquisitions include the following:
- Picis clinical applications (May 20, 2015) by the Harris Operating Group subsidiary. Picis is a provider of perioperative management and emergency room solutions used in over 700 hospitals worldwide.
- Datamine Division from CAE Inc. (July 27, 2015) by the Vela software division. Datamine is the solution for planning and managing mining operations. The software represents Constellation’s expansion into the mining sector.
- Market Leader Inc. from Trulia Inc. by the Perseus division. Market leader is a real estate CRM. Trulia purchased the software for approximately $170 million just over two years ago. A definitive agreement was announced earlier this month with a price of $23 million noted. The deal is expected to be completed before the end of the year.
Given the growth rate, positive results, and impressive acquisition targets, Constellation is an excellent addition to any portfolio. Should current trends continue, investors will see stellar growth and some dividend income as an added bonus for investing in Constellation.
