When the broader Canadian market surges greater than 20% in a yr, but some giant tech shares tumble over 20%, traders must ask: Is one thing essentially damaged, or is the market providing a uncommon likelihood to purchase high quality at a reduction? Two tech corporations — Constellation Software program (TSX:CSU) and CGI (TSX:GIB.A) — have stumbled onerous in 2025. Let’s see if their drops spell hazard or alternative.
Constellation Software program: A uncommon dip in a protracted profitable streak
Constellation Software program has lengthy been a darling of the Canadian market, compounding wealth by way of its disciplined mergers-and-acquisitions (M&A) technique.
But even this market favorite isn’t proof against turbulence. The inventory plunged greater than 25% yr to this point, rattled first by investor nervousness about how synthetic intelligence (AI) would possibly reshape the software program panorama, after which by information that founder and CEO Mark Leonard was stepping down from his position as president after 30 years as a result of well being causes.
Regardless of the management shock, Constellation’s fundamentals stay strong. 12 months to this point, the corporate reported 15% income development to US$8.45 billion, whereas internet earnings slipped 6.3% to US$420 million and earnings per share (EPS) fell 9.9% to US$18.96. Crucially, free money circulation surged 27% to US$1.26 billion — an indication the enterprise stays extremely worthwhile beneath the headline volatility.
After this correction, Constellation trades at what analysts view as a steep low cost, with the consensus value goal implying roughly 37% undervaluation and potential upside of about 58% from its present value close to $3,305 per share.
The inventory has multiplied sevenfold over the previous decade, and if administration can maintain its confirmed M&A engine, traders might nonetheless see annualized returns of 15–25% over the subsequent few years. In brief, this seems to be much less like a collapse and extra like a golden pause.
CGI: A resilient operator in a tough patch
CGI is one other tech heavyweight on the TSX that has misplaced its footing this yr, dropping over 23%. The explanations are much less dramatic than Constellation’s — extra operational than existential. The agency has struggled with slower natural development in comparison with friends and restructuring prices in its Continental European operations, that are quickly dragging outcomes.
In its fiscal 2025 outcomes, CGI reported 8.4% income development to $15.9 billion. Web earnings slipped 2% to $1.66 billion, however adjusted earnings rose 6% to $1.87 billion, and adjusted EPS climbed 8.9% to $8.30. The corporate emphasised that within the fourth quarter, it delivered sturdy money technology and double-digit EPS growth, pushed by AI-enhanced managed companies and a share-buyback program.
Analysts estimate the shares are presently undervalued by about 23%, buying and selling close to $120 per share — implying a possible 30% upside. CGI’s strong stability sheet with an investment-grade S&P credit standing of BBB+ and constant execution of long-term earnings development recommend its struggles must be quick time period.
Two high quality names: One larger cut price
Each Constellation Software program and CGI have been punished this yr, however not as a result of their enterprise fashions are failing. Their short-term earnings dips have compressed valuations to ranges not often seen in high quality Canadian tech. For traders searching for long-term compounders, each shares supply enchantment — but Constellation Software program stands out because the deeper worth play with the extra confirmed compounding document.
Typically, the market’s greatest bargains are merely the market’s finest shares taking a breather. Traders simply have to observe persistence to provide the enterprise — and the inventory — time to get well and thrive once more.
