Trending >

Constellation Software gets $1000 price target at Echelon Wealth

Constellation Software

Constellation Software q2 Record revenue growth and key acquisitions are cause for a revaluation of Constellation Software Inc. (Constellation Software Stock Quote, Chart, News: TSX:CSU), says Ralph Garcea of Echelon Wealth Partners, who has upgraded his rating from “Hold” to “Buy” and raised CSU’s target price from $800.00 to $1,000.00.

This week, diversified software company Constellation Software released its fourth quarter results for the period ending December 31, 2017, featuring a 22 per cent increase in revenue ($688 million as compared to $564 million in Q4 2016) and an adjusted EBITA increase of 15 per cent to $175 million.

Those attractive numbers combine with some key acquisitions of late, including Quebec-based Acceo Solutions Inc., through its wholly-owned subsidiary N. Harris Computer Corp., announced in January.

Garcea sees a number of positives running through CSU, including having a diversified set of products matched with a diversified, global customer base (where the company boasts a greater than 92 per cent retention rate), highly predictable revenue and great capital allocators, according to Garcea.

Tribe

“Deal metrics need to have ROICs of >30% to get evaluated. We believe ROICs will trend lower over time, but still remain over 30%,” says the analyst in a note to clients on Thursday. “CSU has ~80 ‘portfolio managers’ looking at deals with autonomy to do deals valued under $20M. Anything over $20M gets extra scrutiny from head office. We expect deal flow to increase, and to expand across geographies,” he says.

“On C2018E, CSU is trading at an EV/Sales of 4.7x and EV/EBITDA of 18.0x, versus the Global Software comparables at 6.2x and 21.5x, respectively,” says the analyst.

Garcea upgrades his “Hold” rating to a “Buy” and raises his DCF-based target to $1,000.00, representing a projected return of 19.6 per cent at time of publication.

  •  
  •  
  •  

About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Cantech Alerts.

Timely picks from Canada's best analysts. 

F                                                                      
close-link