Who doesn’t love discounts? When you have something really valuable available at a discount, it is an opportunity not to miss. Often, people confuse a higher price with better quality. The price is simply the number that a buyer and a seller agree upon. Real value is determined by your need or how you use it. For instance, a fleet owner will derive much more value from a car than a household. Here is a Canadian stock that is 50% cheaper today, but if you understand its usage, it is a hold forever.
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Why is this Canadian stock 50% cheaper today?
Topicus.com (TSXV: TOI) stock is around 50% below its previous high of $199 in July 2025. The stock is trading near $97, and the reason for the dip is the artificial intelligence (AI) impact on traditional software companies. AI is disruptive; there is no denying that. However, it is not yet profitable in the application space. OpenAI and Anthropic are growing their revenue at a rapid pace but are not yet profitable, as per an article in The Wall Street Journal.
With the speed at which AI is growing, risk-averse investors are watching the outcome. AI stocks are not yet in the core portfolio of most investors because of their volatility. Topicus.com acquires vertical-specific software companies that offer mission-critical applications in niche areas with little competition. This assures it of cash flow from annual maintenance fees.
Topicus.com’s secular growth trend intact
The recent dip in the stock price because of AI is genuine, but it has not changed the world for Topicus.com. If AI applications become sticky and generate regular free cash flow, Topicus.com might acquire them too. Topicus.com’s business is not software but acquiring and holding software companies. It is flexible and targets companies where it sees assured returns. Its target is not revenue growth but free cash flow stability.
Another reason why Topicus.com’s stock is 50% cheaper is the exit of Mark Leonard, the founder of the parent company, Constellation Software. Management change doesn’t generally go well with a successful company because if anything is wrong, the management is first to take a hit. The leadership resigns to protect themselves from the upcoming troubles.
However, Constellation’s management change is a regular succession as the founder retired at age 69 for health reasons. The other core management team is still intact. The dip in share price is the transition of ownership.
Why is this Canadian stock a forever hold?
The market has already discounted Topicus.com stock due to the management change. As for the 50% dip, it mirrors the 53% decrease in net income in 2025. This year could see a remarkable recovery as the company has changed the equity method of accounting for the Asseco shares it purchased in the first quarter of 2025. Under this method, a change in the share price reduced the fair market value of the investment and was reflected in the net income.
Topicus.com has completed a major acquisition with a significant stake in Asseco. A significant amount of the purchase price €162.5 million (11% of revenue) was realized in the amortization of intangible assets as the company writes off major acquisitions faster. These expenses will not be there in 2026, but the free cash flow and revenue from Asseco will be.
If we look at the past, when the company made its previous large acquisition of Topicus.com in 2021, the stock dipped. The company even reported a net loss in 2021 as it impaired some of the acquired assets. This dip extended because of a worldwide tech stock meltdown. However, Topicus.com recovered in 2023 as its net profit and free cash flow recovered. Think of it as the phase where the business has to take a step back to move several steps forward.
