Constellation Software will continue to beat the market, RBC says

RBC Dominion Securities analyst Paul Treiber reiterated an “Outperform” rating on Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) on Jan. 7 and raised his price target to $5,600.00, above the Street average of $5,080.

“We believe that Constellation Software is likely to generate one of the highest returns for shareholders over the long term in our coverage universe,” Treiber said. He attributed his positive view to the company’s ability to compound capital through acquisitions, strong underlying fundamentals supported by attractive market structures and ROIC-based incentives, and a valuation he sees as compelling relative to its long-term growth potential.

Toronto-headquartered Constellation operates a decentralized model, acquiring and managing niche, mission-critical software businesses across industries such as healthcare, government, education and utilities, with operations spanning North America, Europe, Australia, South America and Africa.

Treiber’s comments follow solid third-quarter fiscal 2025 results reported in November. Revenue rose 16% year over year to US$2.95-billion, driven primarily by acquisitions, while net income attributable to common shareholders increased 28% to US$210-million. Cash flow from operations grew 33% to US$685-million, and free cash flow available to shareholders climbed 46% to US$529-million. During the quarter, Constellation completed acquisitions with total consideration of about US$415-million, including deferred payments.

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As reported by the Globe and Mail, Treiber said the results reinforce his view that Constellation’s disciplined acquisition strategy and decentralized operating model continue to support durable growth and strong shareholder returns over time.

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