There is no such thing as a doubt that Shopify (TSX:SHOP) is certainly one of Canada’s premium expertise shares. The Shopify service provider platform has turn into an important instrument for a lot of small, medium (and more and more massive) companies all over the world.
Within the second quarter of 2025, Shopify noticed its gross merchandise quantity and revenues rise by 31% every. Working revenue elevated 56% to $291 million. The corporate generated a considerable $422 million of free money stream within the quarter. That makes a for a 16% free money stream margin, which is fairly spectacular.
Shopify is a premium Canadian tech inventory, nevertheless it’s dear proper right here
Its inventory is up 35% this yr and 91% for the previous 52 weeks! The corporate is again buying and selling close to new all-time highs, and the market has fallen in love with the title once more. Nonetheless, that comes at a value right now.
Shopify’s inventory is buying and selling with a ahead enterprise worth (EV)-to-sales ratio of 15.7, a ahead price-to-earnings (P/E) ratio of 98, an EV-to-earnings earlier than curiosity, tax, depreciation, and amortization (EBITDA) ratio of 92, and a price-to-free money stream of 89.
After a robust run-up this yr, Shopify inventory is only a bit costly. It’s buying and selling at its costliest valuation within the three years since its inventory collapsed in the course of the 2022 tech crash. Actually, it’s rising into its valuation by way of improved outcomes, nevertheless it nonetheless has a protracted solution to go.
Consequently, I’d moderately take a look at another tech shares which might be rather less appreciated proper now. Right here is one I’m concerned about right now’s worth.
Constellation Software program isn’t getting a lot love. Time so as to add?
Constellation Software program (TSX:CSU) inventory is down 7.7% this yr. Worries concerning the impression of synthetic intelligence (AI) on vertical market software program corporations are dragging the inventory into the mud.
Many individuals are throwing out a $3,500 worth goal as a spot to enter Constellation. Nonetheless, if it doesn’t get there, they’re lacking a terrific dip to choose up certainly one of Canada’s finest tech corporations.
Constellation Software program just isn’t as flashy as Shopify. In truth, most Canadians can be very hard-pressed to call certainly one of its vertical market software program companies. Constellation has about 1,000 enterprise models all over the world.
These companies don’t have massive whole addressable markets (TAMs). Nonetheless, they have a tendency to serve a necessary service to their prospects and are very entrenched within the operation of their companies. In some ways, this entrenchment helps protect it from the threats of AI.
Constellation can purchase these area of interest corporations at very enticing costs. Because it doesn’t overpay and it holds these for all times, it might probably earn very enticing charges of return and generate robust money flows. While you purchase Constellation inventory, you might be shopping for a strong and distinctive funding platform.
Constellation is nearly by no means a low-cost inventory. In truth, it at all times appears dear. An organization that has compounded shareholder worth by a 32% compounded annual price ought to by no means be “low-cost.” Nonetheless, at a price-to-free money stream of 25, it’s buying and selling in a pretty vary.
Constellation has every little thing you need in a high-quality compounding inventory: A prime administration crew, a terrific technique, defensive software program belongings, highly effective money era, a terrific steadiness sheet, and a big market to proceed consolidating. This inventory doesn’t appropriate usually. Nonetheless, when it does and the market hates it, it tends to be the proper time to purchase.
The Silly takeaway
Shopify and Constellation Software program are each distinctive Canadian tech shares. One has an enormous TAM to develop into, whereas the opposite has small TAMs however many markets to develop into. Proper now, Shopify seems only a bit dear to be including to, so Constellation Software program will probably be getting my funding {dollars} for now.
