Why This Stock Has the Potential to Rise 1000%

Why Lightspeed POS Ltd (TSX:LSPD) stock needs to be a part of your portfolio.

little girl in pilot costume playing and dreaming of flying over the sky

Image source: Getty Images

Investors are forever looking around for multi-bagger investments. If you get your hands on one stock that is a long-term winner, you can retire wealthy. Think about investors who bet on Amazon after the dotcom crash.

There are so many other instances where stocks have generated millions for investors including Apple, Google, Netflix, and the more recent Shopify.

There is one Canadian tech stock that holds the potential to gain 1000% in the coming years. Lightspeed POS (TSX:LSPD) went public earlier this year and the stock has already doubled since its IPO in March 2019. Lightspeed is a “point of sale company that builds integrated e-commerce, hospitality and supply chain management solutions.”

Accelerating revenue growth

A stock’s key drivers are its revenue and earnings growth. Lightspeed increased sales by 35.1% to $77.5 million in fiscal 2019 (year ended in March). This revenue growth is set to accelerate. Analysts expect the company’s revenue to grow by 46.2% to $113.25 million in 2020 and 48.3% to $168 million in 2021.

Though currently unprofitable, Lightspeed will be increasing bottom-line at a robust pace. Its earnings per share are expected to rise by 94% in 2020 and 45.5% in 2021. In fact, it’s quite possible for Lightspeed to turn profitable by the end of 2023. A high-growth profitable company is a dream for most investors.

What will drive Lightspeed revenue?

Lightspeed is part of a high-growth industry. One Grandview research suggests that point of sale (or POS) services are expected to grow at an annual rate of 7.8% till 2025. At the end of the first quarter of fiscal 2020, Lightspeed is available in 51,000 customer locations in over 100 countries. Its gross transaction volume reached $15.6 billion in the last 12 months.

Lightspeed has achieved an annual growth rate of over 20% in new locations. It’s looking to enter new markets by leveraging sales and marketing expertise. In the first quarter, around 33% of sales were from markets outside North America.

The company has a cash balance of $191 million which is more than enough to service its debt of $13.5 million. It can also grow via acquisitions. Lightspeed recently acquired Europe-based iKentoo, which has over 4k customer locations and a strong presence in France, Switzerland and South America. iKentoo is a leader in POS solutions and business management systems in the hospitality space.

Is Lightspeed stock overvalued?

Lightspeed has a market cap of $3.33 billion, which means that the stock is trading at 29 times 2020 sales. Comparatively, Shopify has a market value of $40 billion and its stock is trading at 26 times 2019 sales. Shopify’s sales are estimated to grow by 43.2% to $1.54 billion in 2019 and 33.6% to $2.05 billion in 2020.

Lightspeed is trading at a premium valuation. However, the company’s robust growth rates support its lofty trading multiples. There’s a good chance that Lightspeed will decline a fair bit in upcoming months as markets are likely to be choppy. Here’s investors need to keep an eye on Lightspeed and buy the stock at every dip.

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 Aditya Raghunath has no position in any of the stocks mentioned. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

growing plant shoots on stacked coins
Tech Stocks

Get Rich Slowly: 1 Smart Stock to Leave in a TFSA for Years and Years

The TFSA isn’t only for short-term goals. With a little time, here’s how you can use stocks to get rich.

Read more »

financial freedom sign
Tech Stocks

2 TSX Stocks for a Legit Shot at $1 Million in 20 Years

Are you looking for two TSX stocks that could get you $1 million in 20 years? Here are my two…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Shopify Stock Surges Past 52-Week Highs: Is it Still a Buy Today?

Shopify (TSX:SHOP) stock reported yet another record-setting Black Friday-Cyber Monday weekend. But does that mean it's still a buy?

Read more »

tsx today
Tech Stocks

TSX Today: What to Watch for in Stocks on Tuesday, November 28

Canadian bank earnings and the U.S. consumer confidence data could give further direction to TSX stocks today.

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

Alibaba Just Became a Dividend Stock… Could This TSX Stock be Next?

Alibaba Group Holding (NYSE:BABA) recently became a dividend stock. Could Kinaxis Inc (TSX:KXS) be next?

Read more »

Business success with growing, rising charts and businessman in background
Energy Stocks

Rising From the Ashes: Canadian Stocks Bouncing Back Stronger

These two growth stocks have surged back after crashing and burning, and it doesn't look like they'll be slowing down…

Read more »

Growth from coins
Tech Stocks

3 Top TSX Growth Stocks to Buy for December

High-growth TSX stocks such as Lightspeed should help you generate market-beating returns over time.

Read more »

Shopping and e-commerce
Tech Stocks

TFSA Investors: Shopify Is a Top Stock That Could Soar in a Bull Market Rally

Shopify (TSX:SHOP) appears to be getting back on the right track, with shares starting to heat up again.

Read more »