Better Than Lightspeed (TSX:LSPD): This Under-$20 Tech Stock Offers Great Value

Investors looking for value in the tech sector could consider buying this under-$20 TSX stock.

| More on:
Different industries to invest in

Image source: Getty Images

Shares of Lightspeed POS (TSX:LSPD) have marked a stellar recovery and have increased by over 300% from March lows. The massive rally in Lightspeed POS stock followed a surge in demand for its digital products and offerings amid a structural shift towards the omnichannel platform.

While growing customer demand led small- and medium-sized businesses (SMBs) to move online, the pandemic further accelerated the pace of the shift, which is benefiting Lightspeed POS significantly. Lightspeed is witnessing incremental demand for its payments solutions and e-commerce platform, which is reflected through its growing customer base and stellar growth in gross transaction volume (GTV).

In the most recent quarter, Lightspeed’s customer base increased to 77,000 customer locations from 51,000 in the prior-year period. Despite challenges, Lightspeed’s GTV increased 17% year over year during the quarter.

While I do not doubt Lightspeed’s growth prospects and expect the company to perform well in the long run, its valuation fails to attract. The company trades at next 12-month EV-to-sales ratio of 16.7, which seems pretty high. Investors looking for growth, even at higher multiples, can consider buying the shares of Lightspeed POS for the long term.

However, if you are looking for value in the tech sector, consider buying this under-$20 TSX stock.

A better bargain

Despite the steep rally in the majority of the TSX listed tech stocks this year, a few continue to offer good value. Absolute Software (TSX:ABT) is one such stock that is available at a bargain, despite the stellar run.

Shares of Absolute Software are up about 91.5% so far this year. However, it is trading at next 12-month EV-to-sales multiple of 4.2, which reflects a discount of 75% when compared to Lightspeed’s forward multiple.

Like Lightspeed, Absolute Software is also benefiting from a favourable industry trend and a large addressable market. Its software and solutions help in the security and management of computing devices, data, and applications. With the structural shift toward working from home and distance learning, the demand for its endpoint security software remains elevated and is likely to support its growth in the foreseeable future.

The company’s annual recurring revenues remain strong and suggest strong performance in the coming quarters. Also, it is fast acquiring customers, which is encouraging. Absolute Software boasts of +13,000 customers. Some of these customers include the world’s largest banks, Fortune 500 companies, and national governments.

Absolute Software also benefits from lower competitive activity. Moreover, with its zero-debt balance sheet and growing cybersecurity spending, it remains well positioned to deliver strong returns in the coming years.

While the company is likely to benefit from strong industry tailwinds, its expansion into newer markets, the launch of new products, and a very high customer retention rate should accelerate its growth further. Besides offering robust growth, Absolute Software also pays a quarterly dividend of $0.08, which implies a decent dividend yield of about 2%.

Investors looking for a high-growth tech stock offering great value could consider buying the shares of Absolute Software.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool owns shares of Lightspeed POS Inc.

More on Coronavirus

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

1 Growth Stock Down 15.8% to Buy Right Now

A growth stock is well-positioned to resume its upward momentum in 2024 following its strong financial results and business momentum.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Stocks for Beginners

3 Things About Couche-Tard Stock Every Smart Investor Knows

Couche-tard stock (TSX:ATD) may be up 30% this year, but look at the leadership and history of the stock to…

Read more »

Plane on runway, aircraft
Coronavirus

Can Air Canada Double in 5 Years? Here’s What it Would Take

Air Canada (TSX:AC) stock has gone nowhere since 2020. Can this change?

Read more »

Senior housing
Stocks for Beginners

Home Improvement Stocks Are Set to Fall (When They Do, Buy These Like Crazy!)

Home improvement stocks are due to drop further in the coming months. But with solid underpinnings for the sector, it…

Read more »

An airplane on a runway
Coronavirus

Forget Boeing: Buy This Magnificent Airline Stock Instead

Boeing (NYSE:BA) stock is looking risky right now, but Air Canada (TSX:AC) stock? Much less so.

Read more »

Man considering whether to sell or buy
Stocks for Beginners

Goeasy Stock: Buy, Sell, or Hold?

When it comes to smart buys, goeasy stock (TSX:GSY) is up there as one of the smartest money can buy.…

Read more »

Woman has an idea
Stocks for Beginners

Here’s Why Magna International Is a No-Brainer Value Stock

Magna stock (TSX:MG) has been climbing back once more, but still offers huge value for long-term minded investors.

Read more »

Aircraft wing plane
Coronavirus

1 TSX Stock Down 60% That Could Bounce Back Stronger

Air Canada (TSX:AC) stock got severely beaten down in the March 2020 COVID crash. Here's why it's probably not going…

Read more »