Constellation Software wins new $4,000 target at Desjardins

Desjardins Securities analyst Jerome Dubreuil says Constellation Software’s (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) Q2 looked soft on organic growth, but strong capital deployment remains the more important value driver.

As reported by the Globe and Mail, in an Aug. 13 update, Dubreuil maintained his “Buy” rating on Constellation and raised his target to $4,000 from $3,900. The average target is $3,917.81.

“CSU’s quarter looked softer on the surface, but management argued today that little has changed beneath it with many factors negatively impacting organic growth being only temporary,” Dubreuil said.

The analyst said Constellation remains on track for a record year of M&A, which has historically been the company’s most important driver of value creation.

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Constellation reported Q2 revenue of $3.34-billion, up 17% year-over-year. Organic growth was 3%, or 1% after adjusting for foreign exchange.

Net income attributable to common shareholders rose to $274-million, or $12.93 per diluted share, from $56-million, or $2.66 per share, a year earlier. Excluding foreign exchange and the IRGA liability revaluation, net income increased 8%.

Constellation completed acquisitions in the quarter for $732-million of cash consideration, including acquired cash. Deferred payments tied to those deals were estimated at $160-million, bringing total consideration to $893-million.

After quarter-end, Constellation completed or committed to additional acquisitions with total consideration of $818-million, including $669-million of cash due on closing and $149-million of estimated deferred payments.

Cash flow from operations rose 10% year-over-year to $477-million, while free cash flow available to shareholders increased 57% to $345-million.

For the first half of 2026, revenue rose 19% to $6.52-billion, while free cash flow available to shareholders increased 48% to $1.08-billion.

Dubreuil said the current pace of capital deployment suggests Constellation is creating significant value, which he said is not reflected in the share price.

Disclosure: Nick Waddell owns shares of Constellation Software

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