Shares of Canadian growth stock Docebo (TSX:DCBO)(NASDAQ:DCBO) have gained 25% year to date, outpacing broader market returns in the process. DCBO stock has, in fact, gained a stellar 661% in cumulative returns since its IPO in October 2019. Let’s see what’s driving the stock higher and if it remains a top bet for growth investors right now.
Docebo is growing at a rapid pace
Founded in 2005, Docebo is an enterprise-facing e-learning platform. It first launched an open-source model that could be installed on enterprise servers. In 2012, the company transitioned towards a cloud-based SaaS (software-as-a-service) business model.
It claims to be the first company to leverage artificial intelligence (AI) and transform corporate e-learning into a competitive advantage for clients who can access data-driven insights and enhance user experience.
Docebo has managed to increase sales from US$17 million in 2017 to US$61.9 million in 2020. In the last 12 months, sales have touched US$82.2 million and are forecast to reach US$103 million in 2021 and US$140.6 million in 2022.
Despite a gross margin of over 80%, DCBO remains unprofitable, as it continues to focus on top-line expansion. However, its operating loss has narrowed to US$5.49 million in 2020 from US$8.88 million in 2019. Analysts expect its loss per share to improve from $0.26 in 2020 to $0.11 in 2022.
Multiple drivers will positively impact DCBO stock
The shift towards remote work has gained pace amid COVID-19. Around 75% of employees are comfortable working from home, and this trend will benefit DCBO stock in the upcoming decade. A company’s employee base can account for over 50% of the total expenses, which means they are an important asset to a business.
While businesses continue to invest heavily in employee development, human resource experts believe organizations will reconsider their approach towards employee training in a post-COVID world.
Docebo’s wide portfolio of e-learning solutions allows companies to create content using AI as well as handle course enrollment and lesson delivery. It provides cloud-based software that can be easily accessed and implemented.
At the end of Q2, Docebo had a customer base of 2,300, including Amazon Web Services, Thomson Reuters, and Hewlett Packard Enterprises. Docebo also outlined a case study where a customer created more than 3,000 courses in 11 different languages for its employees located in 26 countries.
A high customer-retention rate has allowed DCBO to increase recurring sales by 65% annually between 2016 and 2020. In the first half of 2020, recurring sales were up over 60% year over year, indicating that top-line growth remains robust compared to historical figures.
DCBO has also been efficient in its cash burn. For example, the company burnt just US$9 million in cash while its recurring sales rose to US$74 million in 2020, up from US$11 million in 2016. In 2020, the company was also able to report a positive cash flow for the first time ever.
Last year, Docebo spent close to 40% of revenue on sales and marketing. While it’s still reporting a loss, Docebo managed to triple average contract value in the last five years.
DCBO stock is valued at a market cap of $3.6 billion, which means its forward price-to-2022-sales multiple is sky high at 20.5. However, the LMS market might touch US$30 billion by 2025, giving Docebo enough room to expand its top line.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Docebo Inc. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon.