CSU Delivered 20% Growth In Q4 2024

Constellation Software CSU continues to grow fast despite its $100 billion size. For the whole year 2024 the company delivered:

• 20% revenue growth, with total revenue exceeding $10 billion
• Grew free cash flow by 27%, to $69.48 (CA$99.64) per share
• Organic growth of 2%, with recurring revenue being the main growth driver. All other revenues, such as hardware and professional services, are declining. This is good to see as the whole company is shifting to earn higher quality recurring revenues, instead of lower quality earnings from one-time charges.
• CSU converted all Lumine preferred shares into common shares in 2024, now it owns 61.4% of Lumine Group (LMN). LMN has been performing extremely well in the past 2 years, with its stock up around 100%. CSU owned shares are now worth around $6.1 billion with significant growth potentials.
• Net cash spent on acquiring new businesses totaled $1.567 billion, which is less than the $2.196 billion of cash from operation, resulting in $696 million of surplus. The company’s net debt is $2.187 billion, which is about the same as the free cash flow (FCF) earned in 2024. This is impressive because the company is able to maintain a 20% growth rate without taking on any additional debt, and the debt-to-FCF ratio is going down as FCF is growing much faster than the debt amount.

The estimated value per share of CSU is CA$5,378.85, indicating a CAGR of 13% in the next 5 years. Here are the assumptions used in the DCF calculation:

• Latest TTM FCF CA$2.11 Billion
• FCF growth rate of 15% (5YR AVG 21.85%)
• 0% Share dilution (CSU never diluted)
• Future Price/FCF ratio of 30 (5YR AVG 40.1)
• Discount rate of 10%

I think CSU is currently trading at a reasonable price and will continue holding the stock for the long-term. I will add to my position if any correction occurs.

You can also see all my past CSU stock analysis using this link.

Holdings Disclosure

• SoloFIRE CSU ownership: 6% of portfolio
• SoloFIRE CSU Average Cost Paid: CA$3,030.7
• CSU price as of writing: CA$4,557
• Holding time: 3 years

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DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.