2 Compelling Reasons to Snap Up Constellation Software Stock Now

Here’s why I think Constellation Software (TSX:CSU) is a top-tier growth stock to own for the long-term right now.

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The TSX sometimes allows a stock to supply faster-than-usual capital gains growth without the risk of typical high-growth stocks. Most mainstream tech stocks have given pretty rapid growth but have cratered badly in recent years due to the ups and downs of the overall economic climate. 

In my view, one Canadian tech stock stands out from the rest of the sector: Constellation Software (TSX:CSU). In this article, let’s take a look at Constellation stock and dive into why this growth stock could be a top pick for long-term investors right now.

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Proven acquisition strategy

Toronto-based Constellation Software Inc. is one of the best, privately owned, independent private enterprise software companies catering to its boutique clientele through its software and services offerings. The company is focused on developing its portfolio of industry-specific software solutions, providing mission-critical services to customers. More than 125,000 customers across more than 100 countries, among many others, can attest to Constellation Software Inc.’s diversified software business portfolio.

One of the defining strengths of Constellation Software is its highly successful acquisition-driven growth model. The business specializes in acquiring smaller-to-medium-sized software firms and is typically keen on medium-sized, niche vertical market firms having stable revenue streams and customers. This strategy has allowed Constellation to grow while consistently maintaining solid financial performance.

Moreover, the company is very disciplined in terms of acquisition strategy, focusing on strong market position and recurring revenue models. It has resulted in what may be known as a portfolio of cash flow generation companies, becoming a good foundation for further acquisitions.

Consistent growth driven by solid fundamentals

Constellation Software has a history of solid, consistent revenue and earnings growth over many years. It undoubtedly is one of the most reliable performers in the software industry. The company’s approach toward vertical market software firms with strong recurring revenue models has provided an extremely diversified revenue base.

Every acquisition added to the firm continues to add to the company’s revenue growth, allowing Constellation to post continued growth. With annualized growth coming in around 30%, the company has been able to see its valuation reflect these metrics, with many in the market expecting this growth to continue. I’m one such investor.

The bar is undoubtedly set high for this particular growth stock, but I think the future remains bright. Constellation’s strategic goals align well with the fragmented nature of the software market, which should bode well for the company over the long term.

Bottom line

For investors seeking a company with historical growth trends that are really unbeatable over the past two decades, I’d suggest doing some research on this particular name. Constellation Software is well-positioned to see its historical growth trends continue. For those looking for ways to play various secular trends within the tech sector, this would be among my top picks right now.

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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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