Industrial Alliance raises target on Constellation Software, maintains “Hold” rating

Its fourth quarter results were better than expected, but Industrial Alliance Securities analyst Blair Abernethy still thinks Constellation Software (Constellation Software Stock Quote, Chart, News: TSX:CSU) is fully valued at current levels.

On Wednesday, Constellation reported its Q4 and fiscal 2016 results. In the fourth quarter, the company earned $122-million on revenue of $564-million, a topline that bested last year’s figure of $512-million.

Abernethy says Constellation’s revenue just missed his estimate of $567.6-million and the street consensus of $569.9-million. But he says the company outperformed in terms of profitability. He notes that the company’s Q4 EBITDA number of $158-million with margins of 28.1 per cent bested his expectation of EBITDA of $147.5-million, with margins of 26.0 per cent. These higher margins, he notes drove EPS to $5.75, above his estimate of $5.38 and the street consensus of $5.52.

In a research update to clients Thursday, Abernethy maintained his “Hold” rating, but raised his one-year price target on the stock from $600 to $615, implying a return of 2.1 per cent at the time of publication. Despite the target change, the analyst says he can’t recommend investors buy the stock as these levels.

“We believe Constellation still has the opportunity to drive material revenue growth and steadily scale its operations over the next five years. However, at current stock price levels, we are maintaining our Hold rating,” he says.

Abernethy thinks Constellation Software will generate EBITDA of $624.6-million on revenue of $2.36-billion in fiscal 2017. He expects these numbers will improve to EBITDA of $717.4-billion on a topline of $2.65-billion the following year.

We Hate Paywalls Too!

At Cantech Letter we prize independent journalism like you do. And we don't care for paywalls and popups and all that noise That's why we need your support. If you value getting your daily information from the experts, won't you help us? No donation is too small.

Make a one-time or recurring donation

Tagged with: csu
Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Recent Posts

Is Thinkific Labs a buy?

Following the company's first quarter results, ATB Capital analyst Martin Toner has maintained his "Sector Perform" rating on Thinkific Labs… [Read More]

54 mins ago

Chorus Aviation price target trimmed at CIBC

Following first quarter results, CIBC analyst Kevin Chiang has lowered his price target on Chorus Aviation (Chorus Aviation Stock Quote,… [Read More]

11 hours ago

Is Magellan Aerospace stock a buy?

Its first quarter results are in the books and Paradigm Capital analyst J Marvin Wolff thinks there is money to… [Read More]

1 day ago

Phunware is undervalued, Roth says

Ahead of the company's first quarter results, Roth MKM analyst Darren Aftahi thinks there is money to be made on… [Read More]

1 day ago

Héroux-Devtek is a buy, Desjardins says

Ahead of the company's quarterly results, Desjardins Securities analyst Benoit Poirier likes what he sees from Héroux-Devtek (Héroux-Devtek Stock Quote,… [Read More]

1 day ago

JUSH stock is a buy, Beacon says

With its first quarter results on deck, Beacon Securities analyst Russell Stanley thinks Jushi Holdings (Jushi Holdings Stock Quote, Chart,… [Read More]

2 days ago