Best Stock to Buy Right Now: Shopify vs. Constellation Software?
If you're searching for the best Canadian tech stock to buy right now, Shopify (TSX:SHOP) and Constellation Software (TSX:CSU) are probably at the top of your watchlist. Both companies have trounced the broader Canadian market over the past three years, but which one offers a better opportunity today?
Let's compare them side by side.
Over the past three years, Shopify turned a $1,000 investment into $3,678 — an extraordinary compound annual growth rate (CAGR) of 54%. Constellation Software was also amazing, growing that same investment to $2,611, for a 38% CAGR. By contrast, a comparable investment in a Canadian stock market exchange-traded fund (ETF) would have grown to just $1,557, with an annualized return of 16%.
Both stocks have been exceptional performers, but the paths they've taken are very different.
Shopify has become a global e-commerce powerhouse, helping millions of merchants in over 175 countries build and scale their online and offline businesses. Its platform handles everything from storefront design and payments to fulfillment and marketing — all powered by increasingly advanced artificial intelligence (AI) tools.
In fact, Shopify is now leading the charge in AI-driven commerce. It recently launched an AI store builder that lets users create entire storefronts using text prompts. Its enhanced Sidekick assistant uses conversational AI to help merchants analyze trends, manage operations, and personalize customer experiences — all in real time.
Financially, Shopify has been growing quickly. Over the past three years, revenue rose 24.4% per year to US$8.9 billion, while operating income surged nearly 59% annually to US$1.1 billion. However, net income declined 31% to US$2 billion, and earnings per share (EPS) dropped 32% to US$1.55. Despite those earnings challenges, Shopify maintains a clean balance sheet with very little debt. Still, risks remain. Its customer base is mostly small- and mid-sized businesses (SMBs), which are sensitive to economic slowdowns. Plus, competition is fierce. Amazon, Adobe, BigCommerce, and other AI-native platforms are all fighting for market share.
Constellation Software operates a completely different model. It acquires and holds vertical market software businesses — specialized companies that serve industries like healthcare, utilities, education, and government. Each acquisition remains independently operated, and this decentralized structure has earned Constellation comparisons to 'tech's Berkshire Hathaway' by The Economist.
The company's growth is driven by constant acquisitions, and its track record is stunning. For example, over the past three years, revenue rose 25.4% to $10.4 billion, while net income more than doubled, growing 33% annually to $731 million. EPS has followed a similar trajectory. Gross profit margins remain strong, and the company has an investment-grade BBB credit rating from S&P.
However, Constellation isn't without risk. Its business model hinges on finding and integrating new acquisitions. It also carries a long-term debt-to-capital ratio of 49%. And with a share price near $4,959 and a forward price-to-earnings (P/E) ratio of 78, the stock is priced for perfection.
Both Shopify and Constellation Software are elite Canadian tech companies with impressive long-term records. Shopify offers rapid innovation and e-commerce exposure, but comes with higher volatility and more competition. Constellation, however, delivers steady returns through disciplined acquisitions and consistent profitability.
According to analysts, Constellation Software offers a better margin of safety right now — especially given its more predictable earnings and proven acquisition strategy.
Bottom line: If you're choosing just one, Constellation Software is likely a better stock to buy today.
The post Best Stock to Buy Right Now: Shopify vs. Constellation Software? appeared first on The Motley Fool Canada.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Fool contributor Kay Ng has positions in Amazon. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Adobe, Amazon, Berkshire Hathaway, and Constellation Software. The Motley Fool has a disclosure policy.
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