Is it Too Late to Buy Constellation Software Stock? 

Here’s why it may not be too late after all to invest in Constellation Software (TSX:CSU), given its long-term growth prospects.

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Constellation Software (TSX:CSU) is one Canadian tech stock that’s an absolute behemoth. Zooming out on its stock chart below, investors can see a consistent and rather incredible long-term trend of up and to the right. That’s the kind of performance investors want to see from the growth stocks in their portfolio, and this company has certainly proven to be an excellent long-term investment.

The question is whether this performance is bound to continue or if investors may simply be taking too much risk investing at what appears to be the top of a giant mountain. Let’s dive in.

Constellation Software is a tech stock to behold

There are a number of shining examples of tech companies that produce the kinds of returns Constellation Software has over the years. However, the company’s business model is one that’s sustainable, and continued to produce incredible results year in and year out.

Constellation essentially acquires smaller and medium-sized software companies, incorporating them into a growing portfolio of solutions it sells its clientele. Focused on both public and private organizations, Constellation has been able to increase the return on invested capital for its acquisitions due to the network effects generated by its core business.

This has led to a growth-by-acquisition model with an incredible forward runway. The software market remains highly fragmented, and Constellation stands to benefit from continually consolidating this space. I think this is a stock with plenty of runway to continue growing for the next decade or two at or around its current clip.

Why Constellation Software remains a buy

The company’s core business model should propel similar results we’ve seen historically moving forward. In the case of this growth stock, there’s a level of reliability and stability to this growth picture that’s hard to come by in the market.

I also think Constellation is relatively undervalued compared to other U.S.-based companies due to being domiciled in Canada and primarily traded on the TSX. Given the lofty valuations in this space and expectations that multiples could expand when interest rate cuts come into play, I think the timing is right to add to CSU stock over time.

I think this is a stock best owned and not traded. Accordingly, investors may want to dollar cost average in over time when thinking about how to build a position in this expensive stock.

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 Chris MacDonald 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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