Desjardins Securities has initiated coverage on Constellation Software, Topicus.com and Lumine Group with buy ratings, saying recent share price weakness doesn’t reflect their long-term value potential. The firm calls current levels an attractive entry point for investors despite ongoing questions around leadership changes and the impact of artificial intelligence.
BNN Bloomberg spoke with Jérome Dubreuil, research analyst for telecom and media at Desjardins Securities, who said the Constellation group’s decentralized structure, recurring cash flow and strong M&A capabilities support its long-term growth outlook.
Key Takeaways
- Desjardins launched coverage of Constellation Software, Topicus.com and Lumine Group with buy ratings.
- The firm says the group’s recent share weakness doesn’t reflect its long-term value-creation potential.
- M&A remains the key growth driver, with solid cash flow supporting continued dealmaking.
- AI and leadership changes pose risks, but the decentralized model ensures stability.
- Desjardins set price targets of $5,300 for Constellation, $195 for Topicus and $52 for Lumine.
Read the full transcript below:
ROGER: Desjardins has initiated coverage of Constellation Software with a buy rating on the stock. My guest says after an eventful few months, the share price of Constellation does not reflect its long-term value-creation potential. Joining me now is Jérome Dubreuil, research analyst for telecom and media at Desjardins Securities. Jérome, thanks very much for joining us.
JÉROME: Thanks for having me, Roger. Good morning.
ROGER: What are you liking about this group now?
JÉROME: What I like about the Constellation family here is really the long-term value-creation opportunity. This stems from the very long pipeline of M&A opportunities that we’re seeing. It’s been a while since the company has disclosed this pipeline, but there’s no doubt in our minds that it has kept growing. At some point, the transactions will start coming back into the Constellation story. This company is extremely good at finding the right opportunities and making the most out of them.
ROGER: And you’ve got three in here — Constellation, Topicus and Lumine. Is there one that stands out, or are all three pretty solid right now the way you’re looking at it?
JÉROME: Essentially, Constellation, Topicus and Lumine are the same story — it’s the same company. Constellation consolidates the revenue from Topicus and Lumine. But we decided our favourite one was Lumine among the three, and the reason for that is its track record of higher margins and a higher deployment of capital as a percentage of free cash flow generated. Lumine reported last night. Results came in just a touch below our expectations, so there’s a bit of weakness today. We think it’s a good long-term opportunity to get into a very attractive name here.
ROGER: And overall, how have they handled everything with this?
JÉROME: You mean with the results?
ROGER: Yeah, and with the three companies.
JÉROME: The results for Lumine that were published last night — organic growth was a little bit below our expectations. We were looking for two per cent growth; they reported minus one per cent. But really, the right way to approach it is not to put too much attention on a quarter-to-quarter basis. This is a long-term opportunity. The deals these companies are going to be closing will come, in our view. We haven’t seen that this quarter, so there’s maybe a bit of disappointment in the market this morning, but overall, we’re confident management is really hard at work identifying new opportunities.
ROGER: And no concerns about Mark Leonard stepping down?
JÉROME: We thought it was a negative. Obviously, you can’t lose someone like this without some sort of impact, but we think the market reaction was a little overdone. Basically, we think there are two outstanding questions regarding Mark Leonard’s departure. The first is: was he the closer? Was the company able to close some transactions at a certain price that it wouldn’t have been able to otherwise? The second is: was he the reason such a complex organization held so well together?
But Constellation is one of the most decentralized organizations we know of at this scale. Its strategy has always been about decentralization. Mark Miller has been there for a very long time, and on a recent call he addressed the concerns. He essentially said the strategy isn’t changing and, most importantly, he laid out that he sees room for improvement in their capital deployment processes so they wouldn’t have to lower hurdle rates on future acquisitions. We thought that was reassuring. So, it’s a negative, but one that can be dealt with.
ROGER: Does it feel like Miller brings continuity but also some fresh eyes in a way?
JÉROME: Probably wouldn’t go as far as saying “fresh eyes,” since he’s been there a long time, and we think the culture is extremely strong. I wouldn’t say there’s a need for a new system because the track record there is so stellar.
ROGER: And what about AI? It’s what everybody’s talking about right now — what kind of factor is that?
JÉROME: Absolutely, we’ve heard this topic quite a bit this year for a couple of reasons. But really, the more we spoke with developers as we were writing our report, the less concerned we became with the issue. We don’t want to dismiss it — AI is going to be useful and will help on the programming side — but the software business is much more than a few lines of code. It’s really about the integration of the business. There’s maintenance, security patching — there’s just a lot to be done in a software business that’s beyond what AI can bring in the short term.
However, another factor is not necessarily fundamental but relates to the flow of funds. A lot of investors don’t want to miss the AI train. Maybe some who were in Constellation previously have chosen to direct their funds toward AI opportunities instead.
ROGER: OK, and last thing before we go — your target prices and the reasoning behind them.
JÉROME: For Constellation, we have a $5,300 target price at this point — about 40 to 50 per cent upside from the current share price. It’s really about the value of the M&A pipeline and a solid business with strong margins and free cash flow generation.
ROGER: OK, Jérome, thank you very much for joining us.
JÉROME: Awesome. Thanks for having me.
ROGER: Jérome Dubreuil, research analyst for telecom and media at Desjardins Securities.
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This BNN Bloomberg summary and transcript of the Nov. 4, 2025 interview with Jerome Dubreuil are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
