Canadian Tech Stock Smackdown: Shopify vs Constellation Software

Written by Adam Othman at The Motley Fool Canada

What’s more important to you as an investor – rapid growth potential or long-term consistency? This is an important question to ask yourself when you are browsing Canadian tech stocks for your next pick, especially if you are torn between the two sector giants.

The e-commerce giant

Shopify (TSX:SHOP) is an e-commerce giant that operates not just in Canada but around the world. Even after losing a significant part of its market value in the brutal correction that followed the rapid growth during the pandemic, it’s one of the most valuable companies in Canada. The current market value is at about $148 billion.

Shopify is an e-commerce platform that supports millions of e-commerce merchants in about 175 countries. It has also captured about 10% of the US e-commerce market and 6% of the Western European market.

However, its market share is just one of its strengths. The platform’s ease of use and the massive ecosystem of apps it has inspired (about 13,000 in the Shopify app store), allowing e-commerce merchants to perform a number of functions, give it significant momentum and solid growth prospects.

The stock experienced exceptional growth from its inception till the pandemic but the correction phase that followed eroded most of that growth. The recovery has been inconsistent and the most current bullish phase pushed the company up by about 48% in a little over five months. At this pace, the stock can easily double your money in a single year.

A software acquisition giant

Constellation Software (TSX:CSU) is one of the largest software companies in Canada and caters to a wide range of customers (about 125,000 in 100 countries), including both private and public entities, via the companies it owns. The current portfolio is made up of six companies that, in turn, hold dozens of companies, contributing to Constellation’s massive footprint and reach.

This business model allows the company to cater to government and private sector entities’ specific software and service needs. This may include specialized software and platforms. The business model is not unique per se, but Constellation Software’s growth as a stock is certainly in a class of its own.

Story continues

The stock has grown beyond 23,900% in less than two decades, and at its massively inflated price of about $4,400 per share, it’s the most expensive publicly traded security in Canada right now.

That’s not a major issue thanks to fractional shares, and you can still leverage the stock’s growth, regardless of the capital amount. The growth has slowed down, and in the last six months, the stock has risen by about 19%.

Foolish takeaway

Constellation has defied investor expectations for years and every time we think it has hit the peak and will finally enter a bear market phase, the stock shoots up again. However, considering its valuation and current growth pace, Shopify might have a slight edge.

The post Canadian Tech Stock Smackdown: Shopify vs Constellation Software appeared first on The Motley Fool Canada.

When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 32 percentage points.*

They just revealed what they believe are the 10 best Starter Stocks for investors to buy right now… and Constellation Software made the list — but there are 9 other stocks you may be overlooking.

Get Our 10 Starter Stocks Today * Returns as of 10/14/24

More reading

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

2024