There is no doubt that Shopify (TSX: SHOP) is one of Canada’s premium technology stocks. The Shopify merchant platform has become a crucial tool for many small, medium (and increasingly large) businesses around the world.
In the second quarter of 2025, Shopify saw its gross merchandise volume and revenues rise by 31% each. Operating income increased 56% to $291 million. The company generated a substantial $422 million of free cash flow in the quarter. That makes a for a 16% free cash flow margin, which is pretty impressive.
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Shopify is a premium Canadian tech stock, but it’s pricey right here
Its stock is up 35% this year and 91% for the past 52 weeks! The company is back trading near new all-time highs, and the market has fallen in love with the name again. However, that comes at a cost today.
Shopify’s stock is trading with a forward enterprise value (EV)-to-sales ratio of 15.7, a forward price-to-earnings (P/E) ratio of 98, an EV-to-earnings before interest, tax, depreciation, and amortization (EBITDA) ratio of 92, and a price-to-free cash flow of 89.
After a strong run-up this year, Shopify stock is just a bit expensive. It is trading at its most expensive valuation in the three years since its stock collapsed during the 2022 tech crash. Certainly, it is growing into its valuation through improved results, but it still has a long way to go.
As a result, I would rather look at some other tech stocks that are a little less appreciated right now. Here is one I am interested in today’s price.
Constellation Software isn’t getting much love. Time to add?
Constellation Software (TSX: CSU) stock is down 7.7% this year. Worries about the impact of artificial intelligence (AI) on vertical market software companies are dragging the stock into the mud.
Many people are throwing out a $3,500 price target as a place to enter Constellation. However, if it doesn’t get there, they are missing a great dip to pick up one of Canada’s best tech companies.
Constellation Software is not as flashy as Shopify. In fact, most Canadians would be very hard-pressed to name one of its vertical market software businesses. Constellation has about 1,000 business units around the world.
These businesses don’t have large total addressable markets (TAMs). However, they tend to serve an essential service to their customers and are very entrenched in the operation of their businesses. In many ways, this entrenchment helps preserve it from the threats of AI.
Constellation can acquire these niche companies at very attractive prices. Since it doesn’t overpay and it holds these for life, it can earn very attractive rates of return and generate strong cash flows. When you buy Constellation stock, you are buying a powerful and unique investment platform.
Constellation is almost never a cheap stock. In fact, it always seems pricey. A company that has compounded shareholder value by a 32% compounded annual rate should never be “cheap.” However, at a price-to-free cash flow of 25, it is trading in an attractive range.
Constellation has everything you want in a high-quality compounding stock: A top management team, a great strategy, defensive software assets, powerful cash generation, a great balance sheet, and a large market to continue consolidating. This stock doesn’t correct often. However, when it does and the market hates it, it tends to be the perfect time to buy.
The Foolish takeaway
Shopify and Constellation Software are both exceptional Canadian tech stocks. One has a massive TAM to grow into, while the other has small TAMs but many markets to expand into. Right now, Shopify appears just a bit pricey to be adding to, so Constellation Software will be getting my investment dollars for now.
