Constellation Stock: 19% Upside Potential Investors Shouldn’t Miss!

Constellation stock (TSX:CSU) has become the one to beat in the tech industry, with 1,449% growth in the last decade alone.

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Constellation Software (TSX:CSU) is one of those stocks that investors may look at and wonder, “What if I bought back then?” Well, it’s time to stop wondering. When it comes to growth, the share price doesn’t matter if you have enough to invest in it. Instead, the future potential and value of the company is what you should be concerned with.

Which is why Constellation stock is such a great buy on the TSX today.

Sure, it’s expensive

Constellation stock is one of the most expensive stocks on the TSX today. Shares currently trade at about $2,680 as of writing. In many cases, that’s more than some people can afford to invest in total, never mind buying more than one share.

But if you do have the means, Constellation stock is a great investment to consider. The company has grown expensive for a reason, and that reason is its management team. For years Constellation stock has worked on identifying software companies that could do incredibly well with the right management behind it. And the company has purchased them and rebranded them under its own banner, picking up more revenue in the process.

This acquisition and redistribution method has worked for decades. And yes, I do mean decades. Despite being a tech stock, it’s one that’s built its current share price over more than 20 years of being on the market. That’s simply something that most tech stocks can’t claim. And yet the company continues to give investors reasons to buy even today.

Let’s look at earnings

During the most recent earnings report for Constellation stock, the company reported revenue growth of 26% year over year. This represented growth from $1.6 billion in 2022 to $2.1 billion in 2023. Net income fell by 18%, however, with cash flow up 58% during the period as well.

Constellation stock continued to identify new companies for purchase, including acquiring Black Knight’s Optimal Blue business for $700 million. So even with net income down, management continues to have a strong balance sheet that allows for the stock to make even more acquisitions.

Yet with net income down, shares are actually nearing value territory. Yes, value despite trading at such high prices. The price target from analysts continues to rise, which is why now is the time to jump on the stock.

Thinking ahead

If you’re an investor who can afford to put cash into Constellation stock, now is the time to do it. The company has a future consensus target price of $3,182 as of writing. Since it trades at $2,680, that leaves it with a potential upside of 19% as of writing!

What’s more, the company has proven these kind of targets are achievable. Shares of Constellation stock are up 25% in the last year alone. Look back further, and the stock is up an incredible 1,449% in the last decade alone!

But here’s the thing. Constellation stock is still a safe, low volatile option despite all this growth. Given that its management team has become adept at choosing high quality companies to purchase, it’s unlikely this will change in the near or indeed long-term future. Which is why it’s such a great buy, even at a high share price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

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