Adapt IT is currently the subject of a bidding war between JSE-listed Huge Group and Volaris, the subsidiary of a Canadian company called Constellation Software. We own Constellation Software in our funds on behalf of clients and we believe that the share is worthy of consideration for those investors looking to allocate capital to offshore equity portfolios.
Constellation Software focuses on acquiring what it terms “vertical market software businesses”. These software businesses are in a variety of “vertical markets”, from marine asset management to catering and parking.
Constellation has a fantastic long-term track record. The share listed in 2006 and has compounded at a rate of more than 40% per year between 2010 and 2020. This was driven by good operating performances. Earnings per share (EPS) grew at a compound annual rate of 31% between 2010 and 2020. Understandably, growth has slowed down as the business has scaled up. Nevertheless, its operational performance remains impressive even when assessed over a shorter time frame – EPS grew by 20% per year from 2015 to 2020.
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