Canada’s Warren Buffett, Mark Leonard’s Constellation Software growth story continues with Q4 earnings results 6


 

The Machine, Mark Leonard

  • Revenue grew 21% ($831M vs $688M)
  • Organic growth 2%
  • Adjusted EBITA grew 29% ($226M vs $175M)
  • Net Income grew 135% ($179M vs $76M)
  • Adjusted Net Income grew 33% ($187M vs $141M)
  • Acquisition during Q4= $69M
  • Cash flow from operation grew 28% ($208M vs $163M)

 

I would not bore you with more fundamentals. Go look at their filings. They did very well. I do not know how the markets will react this morning but it will be pretty good I am guessing.

 

Today’s post is dedicated to something that I have been thinking of for a while- Like its explosive growth, how long it would take to be the most valuation company in TSX, the world domination etc.

 

Well deserved Mark, well deserved…

 

 

 

Market Cap Growth

Constellation Software’s current market cap is $21B.

Its market cap grew 45% per annum last 10 years

32% per annum last 5 years

28% per annum last 3 years

24% per annum last 1 year

 

 

Not sure how to do math? Let me be kind here.

Constellation Software’s historical market cap

2009-$0.7B

2010-$1.0B

2011-$1.6B

2012-$3.0B

2013-$5.6B

2014-$7.3B

2015-$12.2B

2016-$12.9B

2017-$16.1B

2018-$18.5B

2019-$21.0B (as of Feb 13 2019)

Share issuance last 10 years? ZERO    

 

 

How long it would take for Constellation Software to be the largest company in TSX?

Royal bank is the most valuation company in Canada with its market cap at $145B.

By using Constellation’s weakest 1 year growth rate of 24%, its market cap would be

2019-$26.0B

2020-$32.3B

2021-$40.0B

2022-$49.6B

2023-$61.6B

2024-$76.3B

2025-$94.7B

2026-$117.4B

2027-$145.6B

2028-$180.5B

2029-$223.8B

2030-$344.1B

2032-$426.7B

2033-$529.1B

2034-$656.1B

2035-$1.08T

2036-$1.25T

Let me stop here. Jees. 

 

First of all, why the heck aren’t you investing in Constellation Software yet?

 

Secondly, It would overtake RBC by 2027… Well incorrect, as RBC would be growing as well. RBC has grown by 10% last 5 years but don’t forget, it pays out 4% dividend so its market cap will only grow by 6% per annum. But still, it takes only 12 years for CSU to overtake RBC to become the most valuable company in Canada.  

 

Lastly, its growth rate would decline, as all bigger companies do unless Mark Leonard does his magic.

Mark looked extremely healthy and his executive team looked so chill and capable from my observation during the AGM.

Everyone thought the growth rate of Constellation Software would decrease as it grows and it certainly did as you can see from the table below. Growth rate of the revenue and cash flow has been declining. We don’t see 30-50% growth anymore. We only see 10-20% growth rate.

 

But let’s step back a bit. The 10-20% growth rate is still amazingly high!

With 10% of growth rate you will double your investment in every 7 years.

With 20% of growth you will double your investment in every 3.5 years.

3.5 years – 7 years of doubling your investment sounds astonishing.    

 

 

 

Can the magic of compounding within Constellation Software continue?

 

Well… It seems to be when you see the Company still growing like a machine but   not too sure when I look at this crap below.

 

It just declared $20 per share dividend…

What the heck.

It could have done so much more with the dividend like completely paying off that annoying debentures that they have been paying like 8.8% interest.

Well it optimizes its tax rate with the interest payment but still what’s annoying is annoying…

Is Mark trying to get listed in the Guinness record as highest dividend ever paid in TSX?

Is Mark just having fun? or does he just want to tell the world that he just can do this stunt?

Did he get pressured by major shareholders of the company who need $?

Or does he need the cash for himself?

Mark owns 436,136 shares + 1,000,000 shares controlled by his adult children so that means mark will get about 436,136*$20 *1.33 conversion= $11M and his adult children would get $26M just from that special dividend of US$20 per share.

 

Maybe they need some toys for themselves.

I understand men would get mid-life crisis or something and I think Mark and his adult children deserve some toys.

Well at least Mark deserve it for sure…. Right?  

 

 

For me? I really don’t want the special dividend…. but I don’t own 1,456,136 shares so I guess I am ok…

but I still don’t want it.

 

This will hit my taxes, (even after accounting for the dividend tax credits), and I don’t know any other ways I can make my money compounded at 24%.

I am not a magician like Mark.

 

I can probably do 10-15% but not even close to 24% or higher.

So what’s the point Mark?

What’s your true and dark nature behind of this special f dividend?

It stinks. At least for me.

 

My apologies for all the negativity around Mark here. I love that guy and have tones of respect for him but I still gotta be objective around the special dividend.

Again, what’s annoying is annoying.

 

 

 

What has been up lately with me around Constellation Software?

Well I have been trimming other winners and I have been doubling down on Constellation Software when it was hovering around $830-$900.

So yeah, I was happy with their hiccups they had. It probably was once in a lifetime opportunities to add this beautiful beast.

 

 

Do you remember in Feb 2016 when it was dropped from $585 to $440 over 2 months period? That was 25% drop.

After that I don’t remember a time it dropped below $440.

We may never see $800 of Constellation Software ever again.  

 

 

Unless Mark does another non-value added crazy things like stock split…

 

It would be much satisfying for me to own 1 share of $300,000 BRK.A than $200 BRK.B. Aren’t I right?

 

Based on my highly complex math, Constellation Software share will get there in about 25 years with its expected market cap of $7 trillion. Yes. I am sure this will happen. 🙂

 

   

 

That’s it for me today. Subscribe and follow me in twitter for more fun and random stuff while making some money!

 

 

Here are more posts about Constellation Software

 

Canada’s Warren Buffett, Mark Leonard’s Constellation Software

Constellation Software’s another blowout earnings under Mark Leonard, the best capital allocator in Canada or possibly in the World!

Constellation Software and MTY Food Group’s blowout quarter

 

 

 

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