Lightspeed POS (TSX:LSPD)(NYSE:LSPD) stock has been a top performer among growth stocks on TSX. However, I believe that the future holds much more in the way of growth for this company. Lightspeed is a high-growth, higher-risk option with absolutely incredible growth potential. This makes Lightspeed perfect for younger investors looking to stash some risk capital away in a Tax-Free Savings Account (TFSA) right now.
Here’s more on why I think younger investors should take a look at this growth play today.
Growth-by-acquisition strategy is effective right now
It’s clear that growth is what investors demand these days. Yes, there’s some indication a growth to value rotation could be underway. However, broadly speaking, risk assets are outperforming defensive options today.
Indeed, companies like Lightspeed and Constellation Software (TSX:CSU) are continuing to do very well. I’ve talked about the growth prospects of both companies in the past. And in some ways, investors will notice some similarities in the business models of both these companies.
Comparing the hardware aspect of these companies can be quite complicated. However, on the basis of software, there’s definitely some overlap. Similar to Constellation, Lightspeed has adopted an aggressive acquisition strategy to facilitate long term growth. And, we’ve seen how this strategy has been terrific for the former.
Undoubtedly, Constellation’s management team is efficient in picking the right companies. However, I believe that if Lightspeed mimics Constellation’s approach and makes suitable acquisitions, it can strengthen its top-line easily.
Acquisitions will be crucial for long-term growth
With a great core product portfolio, Lightspeed has expanded its customer base, and its retention rate appears to be great too. Indeed, organic growth has contributed to Lightspeed’s success. However, I believe that Lightspeed has to continue its acquisition strategy to sustain its growth in the long term.
Recently, it purchased two companies. In November, it acquired POS system ShopKeep for approximately $145 million. The following month, it took over Upserve for an estimated $430 million. These acquisitions are a clear indication that Lightspeed is specifically targeting retail and restaurant POS businesses to gain more market share.
As the point-of-sale business is fragmented, SMEs have the liberty to consider various options. However, Lightspeed’s high-quality and low-cost system has strengthened its position in the market since last year. Additionally, its ability to grow even during pandemic-induced economic turmoil has made investors bullish on this stock.
Indeed, I believe that this company has tremendous growth potential. At the same time, I’m aware that its growth rate in future will depend on prudence and how effectively it implements its growth-by-acquisition strategy.
Think Lightspeed is the best thing since sliced bread? So do we:
Before you consider Lightspeed POS, you may want to hear this.
Motley Fool Canadian Chief Investment Advisor, Iain Butler, and his Stock Advisor Canada team just revealed what they believe are the 10 best stocks for investors to buy right now... and Lightspeed POS wasn't one of them.
The online investing service they've run since 2013, Motley Fool Stock Advisor Canada, has beaten the stock market by over 3X. And right now, they think there are 10 stocks that are better buys.
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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software. The Motley Fool owns shares of Lightspeed POS Inc.