Head to Head Comparison: Constellation Software (OTCMKTS:CNSWF) vs. Microsoft (NASDAQ:MSFT)

Constellation Software (OTCMKTS:CNSWF) and Microsoft (NASDAQ:MSFT) are both large-cap technology companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, profitability, risk, dividends, earnings and valuation.

Profitability

This table compares Constellation Software and Microsoft’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Constellation Software	7.60%	48.87%	13.09%
Microsoft	40.31%	31.98%	18.70%

Dividends

Constellation Software pays an annual dividend of $4.00 per share and has a dividend yield of 0.2%. Microsoft pays an annual dividend of $3.64 per share and has a dividend yield of 0.7%. Constellation Software pays out 8.8% of its earnings in the form of a dividend. Microsoft pays out 20.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Microsoft has increased its dividend for 23 consecutive years. Microsoft is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Constellation Software and Microsoft, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Constellation Software	0	1	6	1	3.00
Microsoft	0	5	42	0	2.89

Microsoft has a consensus target price of $564.27, suggesting a potential upside of 13.76%. Given Microsoft’s higher probable upside, analysts plainly believe Microsoft is more favorable than Constellation Software.

Institutional & Insider Ownership

71.1% of Microsoft shares are held by institutional investors. 0.0% of Microsoft shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Constellation Software has a beta of 0.98, indicating that its share price is 2% less volatile than the S&P 500. Comparatively, Microsoft has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500.

Valuation and Earnings

This table compares Constellation Software and Microsoft”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Constellation Software	$11.62 billion	3.64	$512.00 million	$45.33	44.01
Microsoft	$331.84 billion	11.10	$133.75 billion	$17.96	27.62

Microsoft has higher revenue and earnings than Constellation Software. Microsoft is trading at a lower price-to-earnings ratio than Constellation Software, indicating that it is currently the more affordable of the two stocks.

Summary

Microsoft beats Constellation Software on 12 of the 18 factors compared between the two stocks.

About Constellation Software

Constellation Software Inc., together with its subsidiaries, acquires, builds, and manages vertical market software businesses in Canada, the United States, Europe, and internationally. It provides mission critical software solutions for public and private sector markets. The company is also involved in the software licensing; and sale of third-party hardware. In addition, it offers professional, and maintenance and other recurring services. Constellation Software Inc. was incorporated in 1995 and is headquartered in Toronto, Canada.

About Microsoft

Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services. This segment also provides LinkedIn; and dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automate; and on-premises ERP and CRM applications. The Intelligent Cloud segment offers server products and cloud services, such as azure and other cloud services; SQL and windows server, visual studio, system center, and related client access licenses, as well as nuance and GitHub; and enterprise services including enterprise support services, industry solutions, and nuance professional services. The More Personal Computing segment offers Windows, including windows OEM licensing and other non-volume licensing of the Windows operating system; Windows commercial comprising volume licensing of the Windows operating system, windows cloud services, and other Windows commercial offerings; patent licensing; and windows Internet of Things; and devices, such as surface, HoloLens, and PC accessories. Additionally, this segment provides gaming, which includes Xbox hardware and content, and first- and third-party content; Xbox game pass and other subscriptions, cloud gaming, advertising, third-party disc royalties, and other cloud services; and search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates. The company sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online, and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.