This analyst just upgraded Constellation Software

National Bank Financial analyst Doug Taylor says valuation compression has created a compelling entry point for Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) , a company he continues to view as a reliable capital compounder with a long record of disciplined acquisition-led growth.

As reported by the Globe and Mail, Taylor upgraded Constellation Software (to “Outperform” from “Sector Perform” and raised his target price to $3,500.00 from $3,400.00. The average target on the Street is $3,919.29, according to LSEG data.

“Our view on Constellation Software surrounds its stellar track record of deploying capital across vertical software, supported by durable recurring revenue, strong cash flow generation and a balance sheet that still offers meaningful dry powder for acquisitions,” Taylor said.

The analyst said the company’s model and valuation have come under significant pressure as investors weigh the potential long-term impact of new AI advancements on Constellation’s portfolio of software assets and their terminal value. He said a previously slowing capital deployment cadence also contributed to the pressure.

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But, Taylor said, the resulting valuation compression has reached unprecedented levels, with the stock trading at 10.9 times next-12-month EBITDA. In his view, that makes the current setup attractive for a company with Constellation’s long-term record of compounding capital.

Taylor said the renewed acquisition activity should support a revenue growth inflection in fiscal 2026, as the company’s capital deployment cadence recovers from the earlier slowdown.

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