A software program inventory that has made its loyal shareholders rich over the previous decade is ready to launch its second-quarter earnings on August 8. Within the run-up to the earnings, the inventory is seeing shopping for momentum, up 1.5% in August up to now. The inventory in query is Constellation Software program (TSX:CSU). Is that this long-term resilient development inventory a purchase forward of earnings?
A sneak peek at Constellation Software program’s earnings seasonality
Constellation is within the enterprise of buying vertical-specific software program firms that serve mission-critical purposes. Its main supply of income is from Upkeep companies.
Its natural income development was solely 0.5–2% on a year-over-year foundation, which implies the remaining income development comes from acquisitions. The corporate doesn’t reveal particulars about its acquisitions to take care of commerce secrecy and keep away from a bidding warfare. Thus, it’s tough to determine any seasonality in Constellation’s income.
Nevertheless, we checked out Constellation’s sequential income development for the reason that pandemic and located that the second and fourth quarters are comparatively stronger, in all probability due to larger deal closings.
| CSU Sequential Income Progress | Q1 | Q2 | Q3 | This fall |
| 2020 | -0.30% | -3.30% | 8.80% | 8.80% |
| 2021 | 7.80% | 6.20% | 4.00% | 6.40% |
| 2022 | 3.50% | 13.10% | 6.60% | 7.10% |
| 2023 | 3.80% | 6.30% | 4.30% | 9.30% |
| 2024 | 1.30% | 4.90% | 2.90% | 6.40% |
Constellation Software program’s inventory worth momentum
This income seasonality was mirrored in Constellation Software program’s inventory worth momentum. The inventory has seen a pointy leap within the run-up to earnings and dipped later. The dip was steeper after the second and fourth quarter earnings, reflecting revenue reserving.
This development has continued over the past six months regardless of the U.S. tariff uncertainty. It’s because Constellation’s portfolio of software program firms caters to a number of markets and verticals, which helps it diversify the danger. Nevertheless, Constellation did really feel the affect of tariff uncertainty, as the corporate stories its earnings in US {dollars}, and fluctuations in the greenback’s worth elevated natural development from 0.3% to 2% after adjusting for adjustments in overseas trade charges.
Constellation reported a 1.8% sequential income decline within the first quarter of 2025, its first sequential dip since 2020. Its share worth confirmed tepid development in 2025, rising 7.9% year-to-date.
The market revived in April as tariff negotiations progressed, and markets adjusted to the tariffs. If the seasonal development continues, Constellation inventory might see a leap within the first half of August. Nevertheless, the expansion could flatten for the following two months earlier than choosing up the fourth quarter momentum in October 2025.
The best way to put money into Constellation Software program
You may think about shopping for Constellation Software program inventory now and promoting it within the February rally. Nevertheless, such short-term investments carry dangers in a unstable market. As a substitute, you should utilize this seasonality to purchase the shares in March and July dips and hold accumulating the inventory as and when you will have cash to speculate.
Constellation inventory trades at $4,790 per share, which is greater than a month’s paycheque for a lot of. Nevertheless, you may be assured of long run development, contemplating the compounding mannequin it makes use of.
Constellation’s enterprise worth will increase as acquisitions turn out to be accretive. During the last 4 years, the corporate’s earnings per share have grown at a compounded annual development fee (CAGR) of 24%, outpacing the income CAGR of 18.5%. This provides assurance of higher returns in the long run.
