Cormark analyst Richard Tse says that despite a “pricey” valuation, he is still bullish on Constellation Software because it has a solid pipeline of acquisition opportunities and a proven record of execution. Constellation Software’s (TSX:CSU) second quarter showed a return to form, say Cormark analyst Richard Tse.
On July 31st, Constellation reported its Q2, 2014 results. The company earned $22.95-million on revenue of $416-million, up 39% from the same period last year.
Tse says that after a soft Q1, Constellation’s second quarter was a return to the run rate investors have grown accustomed to. The analyst says that despite a “pricey” valuation, he is still bullish on the company because it has a solid pipeline of acquisition opportunities and a proven record of execution.
Those who suspect Constellation may be hitting a wall with respect to acquisitions will simply have those suspicions refuted by data, says Tse. He points to the company’s last seven quarters, which reveal revenue that has been growing consistently at more than 30%. He thinks the company’s opportunity could be even greater as it expands beyond North America; he believes that as much as a third of the company’s current opportunities are now coming from Europe.
In a research update to clients yesterday, Tse maintained his “Buy” rating on Constellation Software, but raised his one-year target price on the stock from $300 to $325.
At press time, shares of Constellation Software were down .6% to $272.94.