Why This Stock Might Be a Hotter Buy Than Shopify Inc (TSX:SHOP)

Shopify Inc (TSX:SHOP)(NYSE:SHOP) has done very well over the past few years, but is the stock running out of steam?

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Shopify (TSX:SHOP)(NYSE:SHOP) has been off to a very strong start in 2019 with its share price climbing more than 30% year to date. Despite having a slowing growth rate and trading at high multiples to both sales and book value, the company has been able to captivate investors. In its most recent quarter, sales increased by 54% year over year, which is terrific sales growth, but it’s also not as strong as it was in prior quarters.

For all the excitement around its growth, there has been criticism around its business model and its inability to turn a profit. However, on the TSX there aren’t many big tech stocks, certainly none as popular as Shopify, and when growth is hard to find, this is certainly a company that stands out from the rest. But as well as Shopify has performed thus far, I don’t see it climbing a whole lot higher, even though I could see it hitting $300.

Instead, I see a much better opportunity for growth investors, and that’s Great Canadian Gaming (TSX:GC). The gaming stock owns a wide array of casinos and has been adding to that collection. Yesterday, the company released its Q4 results which, once again, showed tremendous growth in its top line.

Sales of $342 million more than doubled last year’s tally of just $151 million. And what sets Great Canadian apart from Shopify is that, unlike the tech company, it’s able to stay in the black while growing its revenues. Net earnings for the quarter hit $49.2 million, and those figures are nearly quadruple the $12.9 million that Great Canadian earned a year ago.

What’s behind all the growth?

The big reason Great Canadian is doing so well is, it has won bids in the Greater Toronto Area (GTA) to operate more casinos. While some have been integrated, there is still a lot more work to be done, and that means more growth in future quarters.

Rod Baker, president and CEO of Great Canadian, highlighted the success the company had in 2018: “We achieved several milestones this year including the acquisition and integration of the GTA and West GTA Gaming Bundles, the renovation and expansion of several gaming facilities, the introduction of live dealer table games for the first time in the Greater Toronto Area at Casino Woodbine, and completed corporate and project financings to support our plans to grow the business.”

However, it’s important to note that the growth isn’t going to be limited to just Ontario, as Great Canadian is looking at making investments in its other properties, as noted by the CEO: “As we make progress on the development of our Ontario properties, we continue to explore opportunities to reinvest in our properties in B.C., Atlantic, and United States. In particular, we plan to make capital investments to enhance our B.C. properties in the next few years. We remain committed to finding opportunities to enhance guest experiences at all our properties.”

Bottom line

There’s a lot of growth coming down the pipe for Great Canadian, and with the company being profitable and the stock trading at much more reasonable multiples, it’s a better long-term buy than Shopify is today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

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