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Echelon raises price target on Constellation Software to $1100

Constellation Software

Constellation Software q2Following the company’s first quarter results, Echelon Wealth Partners analyst Ralph Garcea has a bullish feeling about Constellation Software (Constellation Software Stock Quote, Chart, News: TSX:CSU).

Last Wednesday, Constellation 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 last year’s first quarter.

Garcea says this was a strong quarter, across the board, for CSU.

“Total Public Sector revenue grew 30% y/y to $486M (up 5% organically), with maintenance/recurring revenue increasing 34% y/y (up 7% organically),” the analyst notes. “Total Private Sector revenue grew 29% y/y to $233M (up 5% organically), with maintenance/recurring revenue increasing 31% y/y (up 9% organically). We remain encouraged by CSU’s efforts to continue growing recurring revenue as a percentage of total. We believe a ceiling to EBITDA margin exists due to being in 80+ verticals, with limited cost synergies across the full spectrum.”

In a research update to clients today, Garcea maintained his “Buy” rating, but raised his one-year price target on Constellation Software from (C) $1000 to $1100, implying a return of 20 per cent at the time of publication.

Garcea thinks CSU will generate Adjusted EBITDA of (U.S.) $747-million on revenue of $3.02-billion in fiscal 2018. In fiscal 2019, he expects EBITDA of $889-million on revenue of $3.45-billion.

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About The Author /

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.
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