Constellation Software Stock Looks Cheap On Recurring Cash Flow Strength
Global bond yields have been influenced by fresh US Treasury buyback plans that aim to ease pressure at the long end of the curve. When bond markets shift like this, pockets of undervalued stocks based on cash flows can appear as investors focus on rate moves instead of company fundamentals. This article highlights 3 stocks from the Undervalued Stocks Based On Cash Flows screener that may merit closer attention.
The 3 stocks below are just a sample, and the full screen on Simply Wall St surfaced 26 more companies with equally compelling cash flow stories that are not covered here. If you want to quickly identify and analyze which ideas best fit your own style, head straight to the Undervalued Stocks Based On Cash Flows screener.
Kraken Robotics (TSXV:PNG)
Overview: Kraken Robotics is a marine technology company that supplies Synthetic Aperture Sonar systems such as its KATFISH towed SAS and related survey services, along with batteries and underwater robotics, to military and commercial customers that need detailed seabed imaging and mapping. These SAS products and services sit at the center of its cash flow story because they are sold into long term defense and offshore contracts that can produce recurring survey and mapping work, even though other products like SeaPower batteries and LiDAR also contribute to revenue.
Operations: Kraken Robotics generates about CA$66 million from Products and CA$41 million from Services, with revenue mainly coming from the Asia Pacific region at CA$57 million, followed by North America at CA$26 million and Europe, Middle East and Africa at CA$20 million.
Market Cap: CA$1.83 billion
Investors looking for potential cash flow opportunities may find Kraken Robotics interesting because its Synthetic Aperture Sonar and KATFISH systems support high value, often recurring defense and offshore contracts. The stock is flagged as trading around 32% below the screener’s estimated fair value. Recent news around the Covelya Group acquisition and new product orders in 2026 indicates a broader suite of sonar, LiDAR and battery technologies feeding into that contract pipeline. On the other hand, Kraken is still loss making, with negative return on equity, and depends heavily on timely defense and offshore project awards. If execution on SAS programs and integration of new assets falters, the cash flow story could take longer to materialize.
Kraken Robotics’ cash flow story and defense contracts may look underrated, but the real question is how that underwater tech pipeline stacks up against its risks and rewards. Get the full picture in the 2 key rewards and 1 important warning sign
Build your own cash flow shortlist around ideas like Kraken Robotics
Kraken Robotics and the other two stocks in this article all came from a single Simply Wall St screener, but your edge comes from shaping your own filters. Use our flexible Screener to mix valuation, cash flows, balance sheet strength and risks in a way that fits you, or lean on our curated Investing Ideas for ready made starting points.
Celestica (TSX:CLS)
Overview: Celestica is a Toronto based manufacturing and supply chain company that designs, builds, and services complex hardware platforms for original equipment makers, cloud providers, and hyperscalers, including rack scale AI infrastructure through its collaboration with AMD on the Helios platform. Its Connectivity and Cloud Solutions segment is the clearest link to the undervalued cash flow theme, since long running cloud and AI hardware programs can support recurring, service rich contracts that underpin future cash generation.
Operations: Celestica generates about US$3.3b from its Advanced Technology Solutions segment and around US$12.3b from Connectivity and Cloud Solutions.
Market Cap: CA$49.7b
Celestica may be of interest if you are looking for cash flow potential tied to AI and cloud infrastructure rather than one off hardware sales. The Connectivity and Cloud Solutions segment serves hyperscalers with networking, AI compute, and full rack platforms, which supports earnings growth and is cited as a key reason the stock is flagged as trading about 39.8% below the DCF based fair value estimate. At the same time, heavy reliance on a few large cloud customers and high non cash earnings mean investors need to be comfortable with revenue concentration and cash flow quality. The recent US$3b equity raise to fund AI capacity adds both funding resources and dilution risk that investors may want to weigh carefully.
Celestica’s AI rack growth story is tightly linked to a handful of hyperscalers, which can either supercharge or strain future cash flows. See how customer concentration, cash conversion and valuation all line up in the analysis report for Celestica
Constellation Software (TSX:CSU)
Overview: Constellation Software acquires and runs vertical market software businesses that provide mission critical systems and services for specialised public and private sector niches, which creates a wide base of recurring cash flows from licensing, maintenance, professional services and SaaS subscriptions. Instead of relying on a single flagship product, Constellation Software manages a large portfolio of these niche platforms that collectively support the cash flow profile used in its DCF based valuation.
Operations: Constellation Software generates about $12.6b in revenue from its Software & Programming segment, which includes licensing, maintenance, services and other recurring software related income.
Market Cap: CA$63.5b
Constellation Software may appeal to investors who prioritise durable cash flows rather than headline software narratives. Its acquisition and operate model across many vertical market software businesses supports a large stream of recurring revenue that underpins a DCF estimate, and the stock is currently described as trading about 47.5% below that assessed fair value. Reported earnings growth of 49.9% in the past year and net margins at 7.6% indicate notable cash generation, supported by disciplined capital allocation and an ongoing M&A pipeline. The main watchpoint is its high debt load, which can pressure free cash flow if growth slows. For investors willing to weigh that trade off, the combination of recurring cash flows and a perceived discounted intrinsic value may be worth further research.
Constellation Software’s recurring cash flows and acquisition engine can look mispriced next to that quoted 47.5% discount to assessed fair value. See how growth, valuation and balance sheet risks really fit together in the 4 key rewards and 1 important warning sign
Seeking Fresh Alternatives Before Others Do
Fresh ideas do not stay under the radar for long. Once momentum builds, entry points keep dropping and early edges get caught by the crowd. Move first and act now.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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