Constellation is rated A-to-B for a 10-year horizon; increased uncertainty from AI and low organic growth (1%) lowers its tier from previous S-tier status.

Let's do Constellation. Um I feel like Constellation is a good one. Um it's an interesting company. Um I'm quite bullish on the space. I'm not invested in Constellation, but I did buy some of these smaller plays.

Um and Constellation I think did so as well. I think we're over Canadian dollars. we're like 3100 something like that. Um again you could argue that constellation is a bit too big and you know a lot of the bets that they have very much depend on the terminal value. So there are risks.

Um but by now we have enough names on the tier list that I think we can sort of just say okay well how do we think about consolation compared to let's say Adobe and compared to Microsoft um and I personally think it has less risks than Adobe um and probably not as dominant as Microsoft.

So just judge by that chat tell us uh where you would put constellation 10ear time horizon. I I think I would put it somewhere in a maybe we do something like this. I think A to B.

>> We we just don't have enough they own so many businesses and we just don't have enough insights into how each how exposed each one is. Um but then also there's an argument that they're diversified a lot across a lot of different companies.

I think I I think I disagree. I'm not that not as bullish on Constellation. I think uh I think there was a time when constellation was was S tier. I think we also have to recognize like the world has fundamentally changed because of these this LLM technology and you know we have to um you know when the facts change we have to change our opinions and so I think constellation has more uncertainty than uh than it did you know five years ago and so uh you know five years ago would have been an S tier today I think it's it's a to b

Yeah, that's like just one one thing about the comment here. Even management doesn't know how AI will impact it. I get it. Like whenever management is sitting on a call and then saying we don't know what the impact will be, it's sort of a bit scary.

I very much like management teams that say that out loud because all of the companies we're discussing today, not a single CEO knows what the world with the AI will look like in 5 years time.

But 99% of them will tell you they know and it's good for their company. I very much enjoy when the management team is sitting there and just says I don't know how it will, you know, impact the business.

If you just look at the um the money that um consolation spent on buying or acquiring new companies, I think was at an all-time high or at least multi-year high in the last quarter.

Um organic growth and that's sort of the problem. And you know, in terms of value today, um I think it's higher tech. Well, it used to be higher, let's say two months ago. Um maybe now it's it's not that high up again.

I would generally say I see it higher value today than in you know 10 years time because one thing that does worry me about consolation is organic growth.

Um it only grew 1% organically last quarter. I think the number generally has been like 3 or 4% but for uh neutral it was 1%. And and we have a you know a couple people but especially one person in our community who worked for constellation a long time who's now having his own business in the VMS space.

Um and he also said like the most important thing is the terminal value of those companies. Um and you can judge that quite well also by organic growth. Um and if it's so slow for example you could compare it to topicus which is way higher.

Um anyway my point being I think value today because of that is higher than in 10 years just because I think there is a terminal risk um that might be higher.

Now we did put consolation here on A to B 10ear time horizon. I would I would have said like when we covered it I would have still put it into A. Now it would probably be here. um A to B, maybe closer to B.

>> 26 times operating profits is not incredibly cheap. You have the organ the organic >> Did you do that? >> That's like the the one metric. Okay. But like that's the most Yeah, by far you got to look at and then technically you also have to adjust that for their topic stake.

>> Um but that goes to that's why Fisk AI doesn't work there um that well.

But I wouldn't know where it's currently trading there. I think it used to trade at about 18 times when we covered it on the show. It went up. >> That's 17 and a half times true cash. Okay. So that's that's the better metric, huh?

>> Yeah, that's by far the better. I'll put it somewhere here. It's definitely cheaper than Microsoft. Maybe not as cheap as Adobe like somewhere there.

>> also >> down 40% from its all-time high, you know. Not not that that like >> not that that doesn't mean it can't go further, but uh further down, but that interesting. We at, you know, B today, C in 10 years. I think that's pretty close.