1 Practically Perfect Canadian Stock Down 38% to Buy and Hold Forever

A tech stock can look practically perfect when the share price gets cheap. That’s because you can buy future growth at a discount today. The best tech businesses sell software people keep using, they renew it year after year, and raise prices without drama. When the market panics and marks the stock down, long-term investors can sometimes scoop up that steady compounding machine for a lower multiple. The key is simple: the business must keep growing cash flow while the stock price sulks.

TOI

Topicus.com (TSXV:TOI) fits the “quiet compounder” mould. It owns and builds vertical market software businesses, meaning it sells software tailored to specific industries rather than generic tools. Those niche products often stick around for decades because customers hate switching mission-critical systems. Topicus grew out of the same playbook investors love at Constellation Software, with a steady diet of small acquisitions, careful integration, and a focus on recurring revenue.

Over the last year, shares recently traded around $88, versus a 52-week high near $200, which puts it down about 55% from that peak and 38% in the last year. That kind of drop usually signals either a real problem or a market that got ahead of itself and then reversed fast. With Topicus, the important context is that a chunk of reported profit can move around because of investment revaluations, not because customers suddenly stopped paying.

So, what happened? CEO and founder Mark Leonard stepped aside, sending the tech stock and others into a tailspin. However, Topicus kept closing acquisitions, and it kept investing in its portfolio. Management also flagged items that can distort net income, including mark-to-market adjustments tied to its Asseco investment activity. Those headlines can look ugly in a single quarter, but don’t automatically change the strength of the underlying software cash flows.

Into earnings

Now to earnings, starting with the clean, confidence-building set. For 2024, Topicus grew revenue 15% to €1.3 billion, and net income rose 30% to €149.5 million. Cash flows from operations climbed 41% to €347.6 million, and free cash flow available to shareholders increased 44% to €177.4 million.

In Q2 2025, revenue increased 20% to €372.0 million, and net income rose 54% to €41.5 million. That quarter delivered exactly what long-term investors want from a software roll-up: higher sales, higher profits, and continued momentum, without needing a booming economy to make it happen.

Then Q3 2025 arrived and confused people who only glance at the bottom line. Revenue rose 24% year over year to €387.9 million, but Topicus reported a net loss in the quarter, largely tied to revaluation effects around Asseco. Over the first nine months of 2025, it reported a net loss of €9.3 million versus net income of €93.3 million a year earlier, again tied to those investment-related swings. In short, operations kept growing, while accounting noise whipsawed reported profit.

Foolish takeaway

Looking ahead, the bull case stays straightforward. Topicus can keep buying niche software businesses, keep nudging organic growth higher, and keep turning that revenue into cash that funds the next deal. The bear case stays straightforward, too. If acquisition prices rise, if integration slips, or if Europe’s economy drags for longer, growth can cool, and the stock can stay depressed.

If you want one practically perfect Canadian stock down about 38% to buy and hold forever, Topicus makes a strong case, with one big condition. You must stay comfortable with messy reported earnings when investments get revalued, even while the operating business keeps doing its job. The tech stock’s 2024 results showed real compounding in revenue, net income, and free cash flow, and the 2025 quarters showed continued growth in sales even as accounting headlines spooked the market. If you can hold through that noise, this dip can look less like a warning and more like an opening.

The post 1 Practically Perfect Canadian Stock Down 38% to Buy and Hold Forever appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Topicus.com. The Motley Fool has a disclosure policy.