Many times, investors might simply turn their nose up when it comes to expensive stocks. And true, these companies can provide volatility. If you only own a share or two, any movement up or down can make a huge impact on your portfolio.
However, there is one expensive stock that’s the most expensive, and it doesn’t fit the mold. That’s Constellation Software (TSX:CSU). So let’s look at why this company should continue being successful, as well as the past that got it there.
About CSU stock
CSU stock was founded in 1995 by former venture capitalist Mark Leonard with just $25 million. The company focuses on acquiring vertical market software (VMS) companies, targeting industries with specialized software solutions.
Its growth strategy centred around this focus continues, completing hundreds of acquisitions and building a huge portfolio over 75 industries. In that time, CSU stock has created a strong track record of revenue and cash flow growth. While organic growth is there, its acquisitions have been the largest driver, buying low and churning them out for a high profit margin.
This has certainly proven successful, creating long-term value for investors from the disciplined and long-term approach. What’s more, CSU has gained a reputation of granting autonomy to acquired companies, using existing expertise to avoid a disruptive integration. Simply put, it’s been an efficient strategy that hasn’t slowed down.
Recent growth
During the company’s most recent quarter, CSU reported that revenue grew 26% in the fourth quarter and 27% for the year, again mainly through acquisitions. Net income fell slightly for the quarter, but rose 10% year over year. Still, keep an eye out as this could signal a drop in momentum.
The company completed several acquisitions in the fourth quarter and has more in the pipeline for 2024. Analysts believe all this will lead to more positivity for the future. Its largest acquisition continues to perform well also, creating positive organic growth. Overall, its mergers and acquisitions remain strong, with analysts pegging it as an outperformed. In fact, it could hit $4,000 per share in the near future, according to analysts.
Why get in now
If you want to consider getting in now, then look back to see how shares could grow. In the last 10 years, shares of CSU stock have risen by 1,366%! That’s a compound annual growth rate (CAGR) of 27% as of writing! Meanwhile, shares ballooned by 64% in the last year alone.
Let’s say shares grow another 27% in the next year, which again it has done quite easily over the last few years. Here is what $30,000 invested could get you in that case.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| CSU – now | $3,783 | 8 | $5.28 | quarterly | $30,000 | |
| CSU – highs | $4,804.41 | 8 | $5.28 | quarterly | $38,435.28 |
So sure, shares are high. But look at the returns you could create! And those look quite likely. Not just for the next year, but each year moving forward for CSU stock. And all tax-free in a Tax-Free Savings Account (TFSA).
