The Motley Fool

Forget Shopify (TSX:SHOP): Docebo (TSX:DCBO) Is a Tech Stock With Room to Run

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If you’re a small-cap investor, let me introduce you to a little-known tech company called Docebo (TSX:DCBO).

The educational tech firm has a front-row seat to the rapidly growing learning management system (LMS) space, a compelling Software-as-a-Service (SaaS) sub-industry that few investors have heard of. Docebo leverages the power of artificial intelligence (AI) to create an intuitive and customizable e-learning platform primarily used to train small- and medium-sized business (SMB) as well as enterprise workforces.

The company also boasts an impressive client base, despite still being in the very early innings of its growth story.

Hotter than Shopify

Docebo stock has been white hot of late, with shares rocketing nearly 160% from the March trough to the peak reached earlier this week. While shares of the rapidly growing LMS player have been killing it amid the coronavirus crisis, the stock still doesn’t look too hot to handle, especially relative to its peers in the SaaS universe, many of which sport ridiculously high double-digit price-to-sales multiples.

Docebo: A reasonable price to pay for the growth you’ll get

At the time of writing, Docebo stock trades at 12.2 times sales, which is a pretty low price of admission for the type of growth that you’re getting from the name. Docebo averaged nearly 62% in top-line growth over the last three years, and gross margins have been on the rise over the years, swelling past the 80% mark last year.

The company is also cash rich (relative to its size) with over $43 million in cash and cash equivalents, highly liquid with a 1.8 quick ratio, and underleveraged with a 0.13 debt-to-equity multiple.

With such a strong balance sheet and an innovative value-adding platform that continues to gain traction amid the coronavirus crisis, Docebo looks to be a compelling growth hedge for investors seeking to limit damage from the coronavirus-induced recession.

Docebo: Tailwinds ahead!

There’s never been a better time for firms to embrace Docebo’s LMS platform, which can help make the whole process of e-learning a heck of a lot easier for firms forced to work from home . Given the WFH tailwinds, Docebo’s stock ought to be trading at a much higher multiple, especially after its solid first-quarter earnings, which revealed tremendous strength in a time of crisis.

Docebo won over some big-league clients in Q1, including Wal-Mart Stores, and has been experiencing higher traffic in recent months. Wal-Mart has deep pockets. It could have afforded to subscribe to any LMS platform, but it chose Docebo, likely because it liked the unique AI-leveraging features.

With a “moaty” platform and an embedding option with Salesforce.com in place, I certainly wouldn’t be surprised if Docebo ends up being scooped up by the cloud behemoth (or another big-league cloud king) at a later date — perhaps when Salesforce is finished digesting its lofty Tableau acquisition?

Foolish takeaway

There’s no question that the insidious coronavirus has acted as a growth accelerator for Docebo (like with Shopify), as it does its part to facilitate the broader WFH transition.

Small-cap investors enticed by the Docebo growth story would be wise to get a bit of skin in the game here, with the intention of adding to a full position on a meaningful pullback. Docebo stock may be expensive at north of $25, but compared to the likes of a Shopify (which recently traded at over 50 times sales), it sure looks like a steal of a bargain.

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 Joey Frenette owns shares of Salesforce.com. Tom Gardner owns shares of Salesforce.com and Shopify. The Motley Fool owns shares of and recommends Salesforce.com, Shopify, and Shopify.

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