Topicus Stock: Shares React as Cash Flow Doubles!

grow dividends

Shares of Topicus.com (TSXV:TOI), spinoff of Constellation Software (TSX:CSU) rose slightly by about 7% after strong earnings came out for the company. Yet a major question hangs in the balance as to whether investors are really valuing the company correctly. Let’s look at earnings for Topicus stock today and the news that came with it.

Earnings at a glance

Topicus stock reported an increase in revenue of 22% year over year, reaching €278.8 million for the quarter. This included 8% organic growth as well. Acquisitions were completed in cash consideration of €7.2 million as well. Cash flow from operations more than doubled to €25.5 million year over year, up by a whopping 134%!

The big growth came mainly from acquisitions, according to management. This helped fuel an increase in net income as well, reaching €28.3 million compared to €18.4 million the year before. Meanwhile, the increase in cash flow was also “disproportionate,” as there were many businesses invoicing customers for annual software maintenance fees compared to the remaining three quarters.

While growth was there, investors didn’t exactly swarm the stock. So, what’s up?

Other heavy hitters on board

Part of the reason I suspect Topicus stock didn’t exactly soar in share price is twofold. First, a number of tech stocks, both in Canada and the United States, came out with earnings on or around the same day. This put Topicus stock in the shadows. Secondly, while the stock was strong, there wasn’t really any major news that came out for the company.

This is actually a great thing for today’s investor. While Topicus stock rose, it wasn’t by much, meaning you can still get in on a great deal for a great stock. What makes it so great? Because it’s the spinoff of parent company Constellation stock.

Constellation stock has surged over 1,300% in the last decade alone. It’s grown to become an acquisition powerhouse to find essential software companies needing an upgrade. Topicus stock is doing the same thing now, but in Europe (hence the euro reporting in earnings). So, investors today can get a great deal on a long-term hold that also could surge by 1,300% in the next decade.

Fundamentals are strong

Investors seem to be wary of tech stocks right now, especially ones that are new. Granted, Topicus stock falls into both of these categories. It’s a company that’s been on the market for only about a year. And, of course, it’s a software acquisition company, making it a difficult buy if you’re trying to convince investors who have been burned by new tech stocks before.

Even so, Topicus stock is different. First, because it has Constellation stock and its management team behind it. But also, its fundamentals remain strong. The company is well positioned, with just about 54% of its equity needed to pay down all its debts. This is far better than other tech stocks.

Shares have also performed well, with Topicus stock up about 36% year to date as of writing. This makes it a strong, stable growth stock in a tech sector that its parent company has proven is a lucrative one in the past. So, while there wasn’t any major news, that could be a good thing. Let this stock fall under the radar for now. When it’s discovered by the masses, it’s surely set to soar.

The post Topicus Stock: Shares React as Cash Flow Doubles! appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Constellation Software?

Before you consider Constellation Software, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023… and Constellation Software wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 10/10/23

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Topicus.com. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.