Deciding what to do with Constellation Software stock can feel like solving a puzzle that keeps shifting into pieces. If you’re considering whether it’s time to buy, hold, or reevaluate your position, you’re in good company. The stock has seen some dramatic moves lately, down 0.8% in the past week but up 3.3% in the past month. However, if you take a step back, the bigger picture becomes even more interesting. Despite a tough year to date with returns of -14.8%, investors who have stuck with it over the long term have seen gains of 92.1% over three years and almost 200% over five years.
These shifts have not been random. Recent discussions surrounding industry consolidation and new software acquisitions in the vertical market are fueling investor discussions about where Constellation Software goes next. The market’s perception of risk appears to be changing, with short-term concerns being balanced with optimism about the company’s expansion strategy. While momentum has cooled lately, these strategic moves could pay off big time for patient shareholders.
What does Constellation Software look like from a valuation perspective? On a scale where we assign a point for each of the six key checks that indicate a company is undervalued, Constellation scores a 3 out of 6. That’s a solid recommendation, but not overwhelming, so there’s plenty to unpack. Next, we’ll break down how these valuation methods stack up. And stick with it, because there’s an even smarter way to assess value that we’ll reveal at the end.
Why Constellation Software lags behind its competitors
The Discounted Cash Flow (DCF) model is a method that estimates the intrinsic value of a company by projecting future cash flows and then converting them back to today’s dollars. This approach gives investors an idea of what the company is really worth, based on its long-term cash-generating potential.
For Constellation Software, the most recent reported free cash flow was $2.39 billion. Analyst estimates and extrapolations indicate that this figure will grow steadily and reach approximately $5.06 billion by 2035. Notably, analysts only provide detailed forecasts for the first five years, with Simply Wall St continuing these longer-term trends based on reasonable growth estimates.
Based on this DCF analysis, Constellation Software has an estimated net asset value of $5,057 per share. This suggests the stock is trading at a discount of around 25.2 percent to its fair value, which could indicate strong opportunities for long-term investors.
Result: UNDERVALUE
To learn more about how we arrive at this fair value for Constellation Software, visit the Valuation section of our company report.
CSU discounted cash flow as of October 2025
Our Discounted Cash Flow (DCF) analysis shows that Constellation Software is undervalued by 25.2%. Keep track of this in your watchlist or portfolio, or discover more undervalued stocks.
The price-to-earnings (PE) ratio is a commonly used valuation tool, especially for profitable companies like Constellation Software. This metric provides a snapshot of how much investors are willing to pay for each dollar of revenue, making it a good benchmark when profits are recurring and meaningful.
However, determining a ‘normal’ PE ratio is not self-evident. Higher price-to-earnings ratios are generally justified for companies with strong growth expectations or lower perceived risks. In contrast, slower growing or riskier companies tend to trade at lower prices. This context is important when looking at the current status of Constellation Software.
Currently, Constellation Software is trading at a PE multiple of 89.3x. By comparison, the average price-to-earnings ratio in the broader software industry is 55.9x, while direct competitors average 82.9x. That gives Constellation an edge over both the industry and its closest competitors, indicating that the market can expect robust growth from the company.
To provide even more insight, Simply Wall St has developed the “Fair Ratio”, a tailor-made benchmark that takes into account a company’s growth prospects, earnings, risk factors, sector trends and market capitalization. By taking these elements into account, the Fair Ratio offers a more comprehensive perspective than simply looking at sector averages or peer groups.
For Constellation Software, the Fair Ratio is 44.9x. With the current price-to-earnings ratio almost doubling this figure, the stock appears to be trading on the expensive side compared to what is justified by its fundamentals and risk profile.
Result: EXCESS VALUE
TSX:CSU PE ratio as of October 2025
P/E ratios tell one story, but what if the real opportunities lie elsewhere? Discover companies where insiders are betting on explosive growth.
We’ve said before that there’s an even better way to understand appreciation, so let’s introduce you to Narratives. A Narrative goes beyond simple numbers and allows you to define the story and prospects you think best suits Constellation Software, connecting your perspective on the business model, leadership, industry shifts and future prospects with your own financial forecasts for revenue, profits and margins.
Rather than relying solely on historical ratios or analyst consensus, Narratives allows you to tie your understanding of the company to what you believe is a reasonable fair value. This makes it much easier to visualize whether Constellation’s current price is attractive or not. You can create and share stories directly on the Community page on Simply Wall St, where millions of investors update and compare their views as market information changes and new revenue comes in.
This approach means that you always work with the most up-to-date information and can quickly see whether your expected fair value is above or below the share price today. For example, some investors might see Constellation Software’s fair value above $6,000 per share based on continued outperformance, while others see it below $3,500 if they expect growth to cool.
Do you think there’s more to the story for Constellation Software? Create your own story to let the community know!
TSX:CSU Community Fair Values as of October 2025
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.
Companies discussed in this article include CSU.TO.
Do you have feedback on this article? Worried about the content? Please contact us directly. You can also send an email to [email protected]
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