The Constellation Software bounceback is real, RBC says

RBC Dominion Securities analyst Paul Treiber maintained his “Outperform” rating and $4,400 target on Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU), saying a recovery in organic growth and continued acquisition activity could support a rebound in its shares.

As reported by the Globe an Mail, in an Oct. 26 preview, Treiber said Constellation’s Q3 results could provide a catalyst despite acquisition spending tracked during the quarter falling below his expectations.

“Organic growth expected to bounce back,” Treiber said. “Even though Q3 capital deployed on acquisitions in our M&A tracker is below our model, we believe Q3 results may be a catalyst for Constellation’s shares.”

Treiber expects organic growth to return to the company’s 10-year average, while acquisition spending remains healthy when activity through October is included.

The analyst also highlighted Constellation’s valuation as a potential source of upside. “First, we expect organic growth to rebound back to Constellation’s 10-year average. Second, year-to-date capital deployed (including Q4-to-date) remains healthy. Third, Constellation’s shares remain at discounted valuation levels,” he said.

Constellation, which acquires and operates vertical market software businesses, is scheduled to release its Q3 results after markets close Nov. 6.

Separately, the Toronto-based company announced Oct. 21 that it had appointed Daan Dijkhuizen as chief AI officer. Dijkhuizen, currently CEO of the Topicus Operating Group and managing partner of Constellation’s venture arm, VMS Ventures, will retain both positions.

In his new role, Dijkhuizen will focus on expanding investments in AI-native vertical market software companies through VMS Ventures. He will also support Constellation’s operating businesses as they incorporate AI into products and internal operations, with an emphasis on quality, safety and compliance.

The appointment comes as Constellation seeks to expand its AI capabilities across its portfolio while continuing its acquisition-driven growth strategy.

Disclsoure: Nick Waddell owns shares of Constellation Software

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