Why Docebo’s Stock Price Fell by 12% in November

Docebo remains a top bet for long-term growth investors, and the recent selloff in DCBO stock can be viewed as an attractive buying opportunity.

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Shares of Canadian tech company Docebo (TSX:DCBO)(NASDAQ:DCBO) fell close to 12% last month. The decline continued in December as well, and DCBO stock is now down 31% from all-time highs. Docebo comfortably beat Bay Street forecasts in Q3, as it reported earnings per share of US$0.03 compared to consensus estimates of a loss of US$0.11 per share. Its revenue also rose to US$27.1 million, up from US$16.1 million in the year-ago period.

So, does the ongoing pullback provide investors an opportunity to buy a Canadian growth stock at a lower multiple?

The bull case for Docebo

Founded in 2005, Docebo provides enterprise-focused e-learning solutions. The demand for corporate e-learning solutions has gained pace amid the pandemic, which allowed Docebo to increase sales from US$41.4 million in 2019 to US$62.9 million in 2020.

The company initially operated as an open-source model that was installed on customer servers. In 2012, it transitioned towards a cloud-based SaaS (software-as-a-service) business model, allowing Docebo to derive steady cash flows across business cycles.

It was one of the first organizations to leverage artificial intelligence in the e-learning solutions segment providing Docebo with a competitive advantage in this vertical.

The company ended Q3 with 2,600 customers, including Wall Street giants such as Amazon and Walmart. The average contract value soared 20% year over year to US$39,000, which suggests an increase in customer spending. Further, the average contract value for deals closed in Q3 rose by 33% to US$59,000.

Similar to most other growth companies, Docebo is also sacrificing profitability for top-line growth. Its sales have risen from US$17.1 million in 2017 to US$93.19 million in the trailing 12-month period. Comparatively, its operating loss has widened from US$6.4 million to US$10.8 million in this period. It also reported a negative free cash flow of US$1 million in Q3.

However, its adjusted net income improved to US$0.7 million in the September quarter compared to a net loss of US$1.2 million in the year-ago period.

What’s next for DCBO stock?

Docebo is poised for stellar growth in the upcoming decade. The company’s management has forecast a total addressable market of US$30 billion by 2025, indicating a compound annual growth rate of 21% in the next four years.

Docebo sales are forecast to more than double to US$133 million in 2021 and increase by 41% to US$187.5 million in 2022. Given a market cap of $2.64 billion, DCBO stock is valued at a forward price-to-2022-sales multiple of less than 11 times, which makes it vulnerable if markets turn bearish.

Legacy e-learning platforms are inefficient, and Docebo has successfully disrupted this space. An enviable combination of customer acquisition and a high retention rate will allow the company to keep growing the top line in 2021 and beyond, making it a top bet for growth investors.

DCBO stock went public in late 2019 and has since returned over 400% to investors. Analysts tracking the stock expect DCBO to touch $120 in the next 12 months, which is 50% above its current trading price.

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.

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 recommends Amazon and Docebo Inc.

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