Constellation Software is still too pricey, Industrial Alliance says

Despite first quarter results he describes as “solid” Industrial Alliance Securities analyst Blair Abernethy is still not ready to recommend investors jump into Constellation Software (Constellation Software Stock Quote, Chart, News: TSX:CSU).

On Wednesday, CSU reported its Q1, 2018 results. The company earned (U.S.) $82.54-million on revenue of $71-million, a topline that was up 29 per cent over the same period last year.

As a result of the quarter, Abernethy today maintained his “Hold” rating, but raised his one-year price target on Constellation Software from $825.00 to $850.00, implying a return of negative 5.5 per cent at the time of publication. The analyst explained the reasoning behind this action.

“We expect Constellation to continue to drive material revenue growth and steadily scale its operation over the next few years,” he explained. “Q1 demonstrated significantly more small deal closures than last year. We expect the pace of small deal to remain strong in 2018. However, a current stock price levels we are maintaining our Hold rating.”

Abernethy expects CSU will generate EBITDA of $808.7-million on revenue of $3.08-billion in fiscal 2018. In 2019, he thinks the company will produce EBITDA of $920.6-million on a topline of $3.49-billion.