There has been plenty of dislocation in stocks in 2026. If you don’t mind buying stocks against the flow, you can use these dislocations to your advantage.
In fact, you can pick up some high-quality stocks at multi-year low prices and low valuations. If you are looking for some standout growth stocks to buy for the long haul, here is a top stock to think about adding now.
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Constellation Software: A top growth stock, but some concerns to monitor
Constellation Software (TSX: CSU) has been one of Canada’s great compounders. Despite its recent share price collapse (down 48% in the past year), this stock is up 13,400% since its initial public offering (IPO) in 2006.
The company built its fortune by acquiring niche software businesses around the world. Right now, it has over 1,000 operating units that are diversified across a wide array of industries, sectors, and geographies.
Why the stock has dropped 50% in the past year
No doubt, a massive stock collapse is something to be concerned about. This comes from three variables.
First, Constellation’s long-standing CEO and business architect, Mark Leonard, resigned due to health issues. Second, as it has scaled to a large $52 billion company, it is harder to make acquisitions that actually accrete meaningful growth. The last issue and likely the largest cause of the stock declining is fears around the threat of artificial intelligence.
These are concerns investors need to monitor. Fortunately, with the stock price declining, Constellation shares now trade at a very reasonable price that factors in these risks.
The good news is that Constellation appears to be navigating these challenges well. Its new CEO has been with the company ever since it made its first acquisition. He was the COO prior to becoming CEO. He has the experience and acumen to continue operating effectively.
Is AI a tailwind or a headwind?
Constellation is actively using AI as a tool to improve organizational productivity, but also to expand its services to customers. Right now, it seems to be a net neutral to the organization. However, it could become a positive over time.
Software stock valuations have come down. That could start to reflect in the private market, which would open up opportunities to increase its capital deployment into more vertical market software businesses.
Last year, it grew revenues by 15%, with 3% organic growth. Cash from operations increased by 24%, and free cash flows increased by 14%. The company continues to see its cash balance rise, so it has ample capital to continue investing in 2026 and beyond.
A high-quality compounder at a discount
Today, Constellation stock trades for 12 times free cash flow. That equates to an 8% free cash flow yield. That is its lowest valuation in the past 10 years. For a high-quality long-term compounder, that is a pretty attractive purchase price. The only question is how it can take that cash and reinvest it into new growth opportunities?
Certainly, AI is a risk, and investors will want to monitor organic growth and customer churn metrics. However, if it can continue to find opportunities to reinvest, there is no reason why this stock could not be up meaningfully in the next five years. That is especially true if AI ends up being a tailwind for this company rather than a headwind.
