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Docebo (TSX:DCBO): Buy the Dip?

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Working and studying from home is the new norm. Even after the pandemic, many office workers and students are expected to continue telecommuting. This means institutions will need to adopt new technologies to offer the same infrastructure and support offices once did. 

One such critical piece of infrastructure is training. Introducing new skills to a remote workforce is a challenge for even the most resourceful company. Docebo (TSX:DCBO)(NASDAQ:DCBO) offers a software solution that can plug the gap. The stock remains well positioned for tremendous growth.

Despite its promise, Docebo stock has declined along with the rest of the tech sector. It’s down 27% year to date. Here’s why this dip could create an excellent buying opportunity for long-term tech investors. 

Improving financials

The company has made a name for itself on providing SAAS learning platforms; it’s used to train external workforce partners and customers. The company’s offerings are already resonating well with an ever-growing clientele base, helping fuel a 60% revenue growth in the recent quarter.

Docebo bounced to profitability with a gross profit of $13.2 million, with operating net loss shrinking to $654,000 from $3 million. The impressive results affirm why investors pushed the stock higher, depicted by a 600%-plus rally in 2020.

With 94% of sales recurring, Docebo remains well positioned to generate a steady stream of cash flows across various business cycles. Docebo is projected to generate between $18.25 million and $18.75 million in Q4.

Docebo prospects

While Docebo has tanked by more than 20% since the year started, it is still an excellent company with tremendous growth potential. The signing of a strategic partnership with Amazon.com paves the way for its e-learning offerings to power AWS training. 

In addition to Amazon, Docebo also boasts Walmart, Appian, and Thomson Reuters as some of its biggest customers. The e-learning kingpin is well positioned to benefit from strong demand for its Learning Management System as pundits insist that remote working and learning is here to stay.

Docebo’s fourth-quarter results came in stronger than expected. The company reported a 52% jump in revenue and a 49% jump in subscription sales. Cash flow turned positive in this quarter, which is yet another green flag for investors. 

While the software as a service (SaaS) stock is trading at 30 times sales multiple, it is still a fair price to pay considering it is well positioned to build on its 2020 strength after the recent pullback.

Bottom line

The global workforce was compelled to go remote last year. Now, it seems many could be heading back to their offices. However, the tools and software platforms adopted over the past year could stick around. Docebo’s remote workforce training software may retain many of its biggest corporate clients in a post-crisis world. 

However, the stock has dropped recently. While it’s still trading at a rich valuation, this dip could be the opportunity for long-term growth investors to add exposure. 

Looking for another intense growth stock? Here's a pick.

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