Turning $5,000 into $50,000 isn’t a fantasy; it’s exactly what many long-term investors in Constellation Software (TSX:CSU) have already done. And while the share price has climbed into the thousands, the opportunity might not be over. For investors willing to think long-term and tune out short-term noise, this TSX stock still looks like a powerful wealth-building machine.
About CSU
Constellation doesn’t operate like your typical tech stock. It doesn’t chase flashy consumer products or viral growth hacks. Instead, it quietly buys and builds vertical market software companies, niche businesses that serve specific industries and often fly under the radar. That model might sound boring, but the results are anything but. Over the past decade, Constellation has delivered some of the strongest total returns on the entire TSX, and it continues to compound.
This past year has been all about steady growth. Revenue rose 15% year over year in the latest quarter, hitting $2.84 billion. While organic growth was 5%, the TSX stock also completed a flurry of acquisitions, spending $380 million in cash with an estimated $89 million more in deferred payments. That brings total consideration to $469 million for the quarter, which shows just how active Constellation still is on the deal front. These small, bolt-on acquisitions are the backbone of its strategy, and management is relentless about finding the next opportunity.
Free cash flow tells the real story here. In the second quarter, Constellation generated $220 million in free cash flow available to shareholders, up 20% from last year. Over the first six months of 2025, that number jumped to $730 million, an increase of 16%. Even as earnings per share dropped from $8.35 to $2.66 this quarter, mostly due to timing and accounting items, cash flow surged. That’s exactly what you want to see if you’re in it for the long haul.
More to come
What makes Constellation such a compelling long-term pick is how it treats capital. This is a business obsessed with return on investment. It buys profitable companies, integrates them efficiently, and doesn’t overpay. That discipline has allowed it to deliver a return on equity north of 22% and a return on assets above 7%. Those are strong numbers in any industry. And it does all this while keeping debt in check and maintaining a payout ratio near 13%.
The TSX stock isn’t cheap, and it never really has been. Trading at a forward price-to-earnings ratio near 35 and a price-to-sales ratio above six, some investors might hesitate. But valuation alone has rarely been a good reason to avoid Constellation. The TSX stock earned its premium with consistent execution, smart capital allocation, and a business model that scales without needing massive capital expenditures or headline risk.
There are always risks. The software acquisition landscape has gotten more competitive. Earnings can fluctuate quarter to quarter, especially when currency or tax effects come into play. And with over 20 million shares outstanding and a market cap near $92 billion, some investors wonder how much larger the TSX stock can get. But management continues to prove that its pipeline of potential deals is far from dry.
Foolish takeaway
The dividend remains modest, as a $1 payment was declared for this quarter, but the focus has never been on yield. It’s all about compounding. And for tax-free investors with a 10-year view, that makes CSU one of the most intriguing names on the TSX.
If you’d bought $5,000 worth of Constellation 10 or 15 years ago, you might already be looking at a portfolio 10 times larger. The past doesn’t guarantee the future, but when a TSX stock keeps doing the right things, year after year, that future has a way of compounding quietly in your favour. Constellation Software isn’t just a growth stock. It’s a blueprint for long-term wealth.
