Investing in the right fast-rising stocks ought to be most investors’ goals. Indeed, for those looking to compound their wealth, such growth stocks certainly make sense as core portfolio positions. One such company I’ve touted as a top TSX fast-rising stock to buy is Constellation Software (TSX: CSU), a Canadian tech giant.
Let’s dive into why this company is still a buy after its surge to record highs recently.
Constellation Software
Constellation Software is a tech giant that specializes in developing and customizing software for public and private-sector banks. Furthermore, the company specializes in building, acquiring, and managing vertical-specific businesses. With a focus on the public and private sectors, investors gain exposure to the stability public-sector divisions provide and the growth of private enterprises. This has worked out well for the company, judging by its stock chart above.
Founded in 2006, the company is a huge success for Canadian investors. The stock has rallied nearly 20,000% over the past 20 years, and few stocks haves provided returns that come close to this. From a return perspective, Constellation has perhaps the most robust argument to be made as a top software stock to hold during this part of the cycle.
Strong financial performance
Clearly, some strong fundamentals support Constellation’s ever-rising share price. The company’s revenue growth has remained robust despite its massive size, with revenue growing 23% year over year in its most recent quarter to $2.35 billion. Additionally, the company’s reported net income attributable to shareholders surged to $105 million, and earnings increased to US$4.95 per share, up 4.5% over the same quarter the year prior.
These results have led to a company with a valuation of more than $81 billion and a very low beta for its sector of just 0.8. This indicates that Constellation may move in a less volatile fashion than the overall market over time. So, for those looking for defensive options in the tech sector, this stock appears to be it.
Why is this tech giant a buy right now?
There are few options on the TSX for Canadian investors to gain the sort of stability and growth Constellation provides. This is a software giant that’s seen excellent top- and bottom-line growth on a consistent basis. Its business model works and is evidenced by a long track record of growth that few in the industry have.
Yes, things could change, and risks exist. This isn’t a cheap stock either, with CSU stock trading at more than 100 times earnings.
But given the company’s long-term track record, such a premium appears to make sense to me. I think this is a stock worth buying on dips, and I’m personally waiting for one to get in.
