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Constellation Software Inc/Canada is a growth stock to keep your eyes on

22.02.2017 • About Constellation Software Inc/Canada ($CSU) • By InTwits

Have you thought about Constellation Software Inc/Canada as a growth stock? Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story


Constellation Software Inc/Canada showed fast growth in the last financial year. The company's revenue surged on 15.6% in FY2016. In addition to revenue Constellation Software Inc/Canada also keeps delivering EBITDA growth. It was 19.4% in FY2016

In the longer period Constellation Software Inc/Canada showed fast revenue growth of 20.6% from 2013 to 2016 annually. EBITDA surged on 31.3% from 2013 to 2016 annually.

Constellation Software Inc/Canada ($CSU) financials for the last 5 years

mln. $ 2012 2013 2014 2015 2016
Revenue8911,2111,6691,8382,125
Revenue growth, %35.9%37.9%10.1%15.6%
Gross margin, %86.2%85.5%86.1%86.2%87.1%
SG&A, %14.7%
EBITDA186244365463552
EBITDA growth, %31.1%49.5%26.9%19.4%
EBITDA margin, %20.9%20.1%21.8%25.2%26.0%
Net Income9393103177207
Net Income margin, % 10.4%7.69%6.18%9.64%9.73%
 
CAPEX611141319
CAPEX/Revenue, %0.684%0.917%0.831%0.701%0.899%
Debt44477295355347
Cash417871178353
Net Debt/EBITDA0.0x1.6x0.6x0.4x-0.0x
 
ROIC, %45.9%22.4%24.7%38.5%40.5%
ROE, %36.0%35.5%39.2%59.4%52.0%

Profitability and return on investment


EBITDA growth was partly attributed to margin expansion. EBITDA margin increased slightly on 0.800 pp from 25.2% to 26% in 2016. In the last 3 years Constellation Software Inc/Canada's EBITDA margin surged on 5.90 pp from 20.1% in 2013 to 26% in 2016.

Constellation Software Inc/Canada shows attractive ROIC at 40.5% for the last 12 months which assumes stable development model. Three years ago it was considerably lower at 22.4%. Average ROIC for the last three years was 34.5%.

The company showed small growth in Net Income margin of 0.100 pp from 9.60% to 9.70% in 2016. If we look for the longer period Net Income margin surged on 2 pp from 7.70% in 2013 to 9.70% in 2016.

Constellation Software Inc/Canada operates at ROE of 52.0%. It's average level of ROE for the last three years was 50.2%.

Capital expenditures (CAPEX)


The company's CAPEX/Revenue was 0.899% in FY2016. The company showed small CAPEX/Revenue decline of 0.0181 pp from 0.917% in 2013 to 0.899% in 2016. Average CAPEX/Revenue for the last three years was 0.810%.

Leverage (Debt)


Having such a fast growth profile the company keeps negative net debt at -0.0x Net Debt/EBITDA. In the last 3 years Constellation Software Inc/Canada showed big decline in leverage of 1.65x from 1.64x in 2013 to -0.01x in 2016.

Peers in Technology


Below you can find Constellation Software Inc/Canada benchmarking vs. other companies in Technology industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Smart Employee Benefits Inc ($SEB)97.2%151.5%
Sylogist Ltd ($SYZ)25.7%50.5%56.1%31.1%
ProntoForms Corp ($PFM)59.9%75.4%43.9%46.4%
Bluedrop Performance Learning Inc ($BPL)13.9%33.5%37.5%17.3%
iLOOKABOUT Corp ($ILA)19.6%8.9%58.8%32.3%
 
Median (35 companies)2.4%11.4%13.7%12.8%-1.5%
Constellation Software Inc/Canada ($CSU)35.9%37.9%10.1%15.6%


Top companies by Gross margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Absolute Software Corp ($ABT)73.6%76.3%78.4%81.1%84.4%
ProntoForms Corp ($PFM)96.1%98.1%98.0%79.4%
Sandvine Corp ($SVC)67.5%74.1%76.8%77.8%75.9%
Espial Group Inc ($ESP)77.5%81.7%78.5%74.3%
Halogen Software Inc ($HGN)72.0%74.8%71.8%73.8%
 
Median (32 companies)52.4%46.8%47.4%50.0%51.6%
Constellation Software Inc/Canada ($CSU)86.2%85.5%86.1%86.2%87.1%


Top companies by EBITDA margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Wi-LAN Inc ($WIN)40.9%12.2%56.2%53.2%57.8%
Computer Modelling Group Ltd ($CMG)53.8%52.2%51.5%50.8%46.3%
Sandvine Corp ($SVC)0.9%24.0%28.2%35.1%20.3%
Open Text Corp ($OTC)26.5%29.1%30.0%31.8%33.5%
Kinaxis Inc ($KXS)18.7%23.0%19.2%28.0%
 
Median (34 companies)8.0%5.2%4.7%7.7%19.0%
Constellation Software Inc/Canada ($CSU)20.9%20.1%21.8%25.2%26.0%


Top companies by CAPEX/Revenue, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Sandvine Corp ($SVC)4.9%3.2%3.2%4.8%3.4%
Kinaxis Inc ($KXS)2.9%2.3%5.0%4.7%
Open Text Corp ($OTC)2.1%1.7%2.6%4.2%3.8%
Absolute Software Corp ($ABT)1.7%1.2%1.9%3.1%3.8%
Halogen Software Inc ($HGN)4.9%9.0%8.4%2.9%
 
Median (35 companies)1.6%1.5%1.3%1.4%1.5%
Constellation Software Inc/Canada ($CSU)0.7%0.9%0.8%0.7%0.9%


Top companies by ROIC, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Bluedrop Performance Learning Inc ($BPL)10.0%-38.2%-29.9%66.5%83.2%
Computer Modelling Group Ltd ($CMG)74.2%68.6%62.9%63.5%57.1%
Kinaxis Inc ($KXS)61.8%63.6%44.0%
SMART Technologies Inc ($SMA)21.4%-18.9%28.1%43.8%-20.4%
Sandvine Corp ($SVC)-4.9%16.9%20.2%21.7%10.4%
 
Median (35 companies)2.6%-5.4%-0.0%0.1%9.3%
Constellation Software Inc/Canada ($CSU)45.9%22.4%24.7%38.5%40.5%


Top companies by Net Debt / EBITDA

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Mad Catz Interactive Inc ($MCZ)32.2x1.2x9.4x
Mitel Networks Corp ($MNW)3.7x3.8x2.6x6.2x
BlackBerry Ltd ($BB)-0.5x-2.3x1.7x0.8x
Open Text Corp ($OTC)0.1x0.2x1.8x1.5x1.4x
SMART Technologies Inc ($SMA)2.1x1.2x1.3x
 
Median (21 companies)-0.4x-0.6x-1.3x-1.5x-0.9x
Constellation Software Inc/Canada ($CSU)0.0x1.6x0.6x0.4x-0.0x