A tech inventory can look virtually excellent when the share worth will get low cost. That’s as a result of you should purchase future development at a reduction in the present day. The most effective tech companies promote software program folks preserve utilizing, they renew it 12 months after 12 months, and lift costs with out drama. When the market panics and marks the inventory down, long-term buyers can typically scoop up that regular compounding machine for a decrease a number of. The hot button is easy: the enterprise should continue to grow money movement whereas the inventory worth sulks.
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TOI
Topicus.com (TSXV: TOI) matches the “quiet compounder” mould. It owns and builds vertical market software program companies, that means it sells software program tailor-made to particular industries somewhat than generic instruments. These area of interest merchandise usually stick round for many years as a result of prospects hate switching mission-critical programs. Topicus grew out of the identical playbook buyers love at Constellation Software programwith a gentle food regimen of small acquisitions, cautious integration, and a give attention to recurring income.
Over the past 12 months, shares just lately traded round $88, versus a 52-week excessive close to $200, which places it down about 55% from that peak and 38% within the final 12 months. That sort of drop normally indicators both an actual drawback or a market that obtained forward of itself after which reversed quick. With Topicus, the necessary context is {that a} chunk of reported revenue can transfer round due to funding revaluations, not as a result of prospects all of the sudden stopped paying.
So, what occurred? CEO and founder Mark Leonard stepped apart, sending the tech inventory and others right into a tailspin. Nonetheless, Topicus stored closing acquisitions, and it stored investing in its portfolio. Administration additionally flagged objects that may distort web revenue, together with mark-to-market changes tied to its Asseco funding exercise. These headlines can look ugly in a single quarter, however don’t robotically change the energy of the underlying software program money flows.
Into earnings
Now to earnings, beginning with the clear, confidence-building set. For 2024, Topicus grew income 15% to €1.3 billion, and web revenue rose 30% to €149.5 million. Money flows from operations climbed 41% to €347.6 million, and free money movement accessible to shareholders elevated 44% to €177.4 million.
In Q2 2025, income elevated 20% to €372.0 million, and web revenue rose 54% to €41.5 million. That quarter delivered precisely what long-term buyers need from a software program roll-up: greater gross sales, greater income, and continued momentum, with no need a booming economic system to make it occur.
Then Q3 2025 arrived and confused individuals who solely look on the backside line. Income rose 24% 12 months over 12 months to €387.9 million, however Topicus reported a web loss within the quarter, largely tied to revaluation results round Asseco. Over the primary 9 months of 2025, it reported a web lack of €9.3 million versus web revenue of €93.3 million a 12 months earlier, once more tied to these investment-related swings. In brief, operations stored rising, whereas accounting noise whipsawed reported revenue.
Silly takeaway
Wanting forward, the bull case stays easy. Topicus can preserve shopping for area of interest software program companies, preserve nudging natural development greater, and preserve turning that income into money that funds the subsequent deal. The bear case stays easy, too. If acquisition costs rise, if integration slips, or if Europe’s economic system drags for longer, development can cool, and the inventory can keep depressed.
If you’d like one virtually excellent Canadian inventory down about 38% to purchase and maintain perpetually, Topicus makes a powerful case, with one large situation. You will need to keep comfy with messy reported earnings when investments get revalued, even whereas the working enterprise retains doing its job. The tech inventory’s 2024 outcomes confirmed actual compounding in income, web revenue, and free money movement, and the 2025 quarters confirmed continued development in gross sales whilst accounting headlines spooked the market. In the event you can maintain by that noise, this dip can look much less like a warning and extra like a gap.