Topicus.com (TSXV:TOI) shares surged 55% in a year as the company deployed more capital on acquisitions. This raises the question of whether the share price will settle after this big rally. To answer this, we need to understand the business model of Topicus.com. This company is a spin-off of Constellation Software and mimics the parent’s business model.
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The growth model of Topicus.com
Topicus.com acquires software companies that operate in verticals, such as finance, education, healthcare, and social services. These verticals are core to the economy. The companies Topicus.com acquires are involved in mission-critical applications. This ensures recurring cash flow from maintenance services flowing in. The company uses the cash from acquired companies to acquire more companies.
In the second quarter of 2025, the company took out a €295 million loan to fund acquisitions worth €210.3 million (including cash flow). The new acquisitions increased its revenue by 20% to €372 million and net income by 54% to €41.5 million. The sudden jump in acquisitions is one of the triggers for the 55% rally.
Topicus.com’s share price depends on the accretive value of the acquisitions. Some acquisitions generate better returns than others. Although the company mostly funds its acquisitions from cash earned from acquired companies, it also resorts to debt funding if the acquisition deal is lucrative. Aggressive acquisitions can initially lead to a net loss or negative free cash flow because of the timing of annual software maintenance fees. However, the earnings normalize over the year.
Is there more upside for Topicus.com?
Topicus.com has recently completed an aggressive acquisition round. If we look at the past growth cycles, the stock corrected after a growth spurt.
- The stock surged 100% between March 19 and September 19, 2021, as the company made a significant acquisition of Topicus.com. The stock corrected 40% later because of the tech bubble burst.
- The next big rally of 55% came in the first half of 2023. Here, revenue growth momentum accelerated and then tapered.
- The stock surged 40% in the first quarter of 2024 and another 40% in the first half of 2025.
Except in 2022, the stock has rallied mostly in the first half because the annual maintenance invoice for most businesses is raised in the first quarter.
If the stock continues this trend, it could correct in August or the entire second half before the next big growth spurt. The stock has already begun correcting and could fall further until the valuations normalize to a 50 times forward price-to-earnings ratio.
How to invest in this stock?
Topicus.com is a growth stock that can help you build wealth in the long term with its compounding business model. The stock has already surged 200% in four and a half years. Its diversified exposure to finance, education, and healthcare verticals produces resilient growth.
The above price momentum can help you take advantage of the predictable dips due to the timing of the cash flows. Since the second half is relatively slow for Topicus.com, you could consider investing in this stock in small monthly installments. Instead of investing a $2,000 lump sum, you can invest $400 each month for the five months of the second half and reap the benefits of the first half growth rally. You can keep accumulating more shares of Topicus.com every year in the July to November period, thereby getting the benefit of buying the dip and dollar cost averaging.
Another short-term strategy could be to switch the investments to seasonal stocks. For instance, e-commerce stocks like Shopify see a seasonal rally of 50–70% between October and February. You could invest now in Shopify and let your money grow during the holiday season. In January, you can book profits and allocate that money to Topicus.com. However, this strategy carries risk as the seasonality may not bear fruit if macroeconomic conditions change.
In either case, both Shopify and Topicus.com are fundamentally strong stocks that can generate strong returns in the long term.
