Constellation Software: Fair Value Estimate Increased on More Positive Growth; Shares Fairly Valued

We are increasing our fair value estimate for narrow-moat Constellation Software to CAD 5,230 from CAD 3,550 as we transfer coverage of the company to a new analyst. We continue to view the company as a beneficiary of switching costs inherent in vertical market software, as well as intangible assets due to management's ability to source and acquire new businesses. Our revised fair value estimate is based on our belief that management can still increase the amount of capital it deploys at high rates of return, resulting in a 10-year revenue CAGR of 18.4%, compared with our previous 14.7% estimate.