The progress in the development of a vaccine against COVID-19 has led the S&P/TSX Composite Index to rise 8.4% higher for this month. Amid the increased investor confidence, here are the three TSX stocks that can double your investments in the next three years, given their large addressable markets and expanding market share.
Docebo (TSX:DCBO), which provides a cloud-based enterprise learning platform for enterprises, is up over 235% for this year. With more people preferring to work from their homes amid the pandemic, the demand for the company’s services has increased.
In the recently announced third-quarter earnings, its revenue rose 52%, driven by both an increased number of customers and a higher average contract value. At the end of the quarter, the company had 2,025 customers compared to 1,632 customers at the end of the previous year’s quarter. Its average contract value increased close to 25%. Further, the revenue contribution from its recurring sources increased to 93.8%, which is encouraging.
Docebo’s gross profit margins improved 200 basis points to 82.1%, while its adjusted EBITDA came in at $0.6 million compared to a loss of $1.4 million in the previous year’s quarter. It generated positive cash flows of $0.5 million from its operating activities, compared to negative cash flows of $1.9 million in the previous year’s corresponding quarter.
Meanwhile, I expect the demand for Docebo’s services to thrive in the post-pandemic world, given its highly configurable learning platforms and utilization of artificial intelligence to enhance users’ learning experience.
MarketsandMarkets projects the global learning management system (LMS) market to reach US$25.7 billion by 2025, representing a compound annual growth rate (CAGR) of 14% from US$13.4 billion in 2020. So, given its large addressable market and increasing market share, I am bullish on Docebo.
Amid the low interest rate environment, the refinancing activities has increased, driving the demand for Real Matters’s (TSX:REAL) services, which provides technological solutions for mortgage lenders and insurance companies. In the first three quarters of 2020, its top-line has grown at 54%, while its adjusted EBITDA increased by 236.2%.
The company is adding new customers and expanding its market share through its strong network capabilities and proprietary platforms. It has net added 11 new clients in each title and appraisal division in the first three quarters. The company has 60 of the top 100 mortgage lenders on its client base, which is encouraging.
With the economic indicators still weak, the central banks will not be in a hurry to raise interest rates, which would benefit Real Matters.
By the end of fiscal 2021, Real Matters aims to expand its market share in the U.S. Appraisal segment to 15-20% and the U.S. Title segment to 1-3%. With the management projecting its addressable market to be at US$13 billion, it has significant potential to expand. Given its growing market share and improving margins, I expect Real Matters’s stock price to double in the next three years.
My third pick would be Lightspeed POS (TSX:LSPD)(NYSE:LSPD), which provides omnichannel solutions for retailers and restaurants. Amid the pandemic, many SMBs (small- and medium-scale businesses) moved their businesses online. This shift to digitization has created a long-term growth opportunity for Lightspeed POS.
At the end of the third quarter, the company’s customer base stood at 80,000. Meanwhile, AMI Partners estimates that there are 47 million retailers and restaurants worldwide, which are Lightspeed POS’s potential customers. So, the company has significant scope for expansion.
With cash and cash equivalents of $513.1 million at the end of the quarter, the company is well-positioned to acquire its peers to increase its market share. Earlier this month, Lightspeed POS announced to have signed an agreement to acquire ShopKeep, a cloud commerce platform provider.
Meanwhile, the company is also focusing on developing innovative products to increase its customer base and maximize its revenue per customer. It recently introduced e-commerce for restaurants, order ahead, and Lightspeed subscriptions. So, given its strong growth prospects, I expect the company to deliver multi-fold returns over the long run.
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The Motley Fool owns shares of Lightspeed POS Inc. The Motley Fool recommends Real Matters Inc. Fool contributor Rajiv Nanjapla has no position in the companies mentioned.