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Constellation Software: Over 30% correction - time to stock up?

I am currently working with Constellation Software $CSU (-0,12 %) and am wondering whether the market is currently overreacting here. Since the all-time high of over CAD 5,300, we have fallen to around 3,200 CAD down.

Why the sell-off?

Leonard's departure: Mark Leonard has stepped down as CEO for health reasons. He is the legend behind the model.
AI fear: Fears are rife that Gen-AI will disrupt the small niche software builders.

But:

While the share price is crashing, FCF recently rose by a whopping 46 % rise.
The EV-to-FCF ratio is currently approx. 20 - a level that we have not seen for years. By comparison, we usually had to pay a multiple of 30+ for this quality.

(Source: Marketscreener)

To me, this looks like a classic "scissors" situation: The fundamentals (cash!) continue to grow, but the share price collapses due to emotional news. Is the business model really threatened by AI, or is this a rare opportunity?

I am invested with about 2% of my portfolio (currently approx. -20%), but am considering doubling the value.

I am looking forward to your opinions.

10 Commentaires

fund_navigator_elshq@fund_navigator_elshq

I assume that everyone is sitting like the rabbit in front of the snake "AI" and is afraid, the same applies to $ADBE. I believe in both companies, they will simply continue to function and adapt. People can never imagine that companies don't stand still - they simply adapt to new technologies like AI. They don't wait to be driven over the edge.

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Snoopy@Snoopy

@fund_navigator_elshq I agree. The same was true of Alphabet a year ago.

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fund_navigator_elshq@fund_navigator_elshq

@Snoopy Fortunately, I bought them back in 2024 for a P/E ratio of 17, and even then I was shaking my head as to why people put up with it. Today, Google's P/E ratio is >30 - I'd rather not buy now.

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TomTurboInvest@TomTurboInvest

$CSU has been in a consolidation phase with relatively high trading volumes since the beginning of November. @Tenbagger2024 wrote a detailed analysis a few weeks ago. I shared a few details on the chart - you can find them in the feed from $CSU
I have now started to build up a position, a breakout from this phase would no longer surprise me.

https://www.tradingview.com/x/B07vt5lf/

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Snoopy@Snoopy

@TomTurboInvest Thank you for your input. I have already read the information from the feed and it underlined my opinion.
I am curious to see how the stock market will react to the next figures

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Tenbagger2024@Tenbagger2024

@TomTurboInvest $UFPT could also be interesting now

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TomTurboInvest@TomTurboInvest

@Tenbagger2024 There are currently an incredible number of companies - too many - that could take off in 2026.

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aminemeskni@Aminmeskini

That's exactly my thesis, it's now 4% of my portfolio. I prefer csu because the business is much broader than Adobe. I will continue to buy until the market changes its mind. I advise you to watch Canadian videos here.

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Faule S.@Faule_Socke

I put two of them under the Christmas tree.
Firstly, they now use AI themselves in development and support. And secondly - the moat. They are sitting on decades of industry data and experience with very specific, customized solutions.

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Christoph@ChrisBizz

👍🏻

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