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 |
|---|
| Revenue | 891 | 1,211 | 1,669 | 1,838 | 2,125 |
|---|
| 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% |
|---|
| EBITDA | 186 | 244 | 365 | 463 | 552 |
|---|
| EBITDA growth, % | | 31.1% | 49.5% | 26.9% | 19.4% |
|---|
| EBITDA margin, % | 20.9% | 20.1% | 21.8% | 25.2% | 26.0% |
|---|
| Net Income | 93 | 93 | 103 | 177 | 207 |
|---|
| Net Income margin, % | 10.4% | 7.69% | 6.18% | 9.64% | 9.73% |
|---|
| |
| CAPEX | 6 | 11 | 14 | 13 | 19 |
|---|
| CAPEX/Revenue, % | 0.684% | 0.917% | 0.831% | 0.701% | 0.899% |
|---|
| Debt | 44 | 477 | 295 | 355 | 347 |
|---|
| Cash | 41 | 78 | 71 | 178 | 353 |
|---|
| Net Debt/EBITDA | 0.0x | 1.6x | 0.6x | 0.4x | -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 ($MCZ) | 32.2x | 1.2x | | 9.4x | |
| Mitel Networks Corp ($MNW) | 3.7x | 3.8x | 2.6x | 6.2x | |
| BlackBerry Ltd ($BB) | -0.5x | -2.3x | | 1.7x | 0.8x |
| Open Text Corp ($OTC) | 0.1x | 0.2x | 1.8x | 1.5x | 1.4x |
| SMART Technologies Inc ($SMA) | 2.1x | | 1.2x | 1.3x | |
| |
|---|
| Median (21 companies) | -0.4x | -0.6x | -1.3x | -1.5x | -0.9x |
|---|
| Constellation Software Inc/Canada ($CSU) | 0.0x | 1.6x | 0.6x | 0.4x | -0.0x |
