1 Canadian Tech Stock I’d Buy Before Shopify Stock

Shopify stock (TSX:SHOP) has had an excellent year, but it hasn’t been without volatility. This one might be a better tech stock instead.

| More on:
Hands shaking over a business deal

Image source: Getty Images.

Tech stocks have consistently grabbed investors’ attention due to their potential for rapid growth. Shopify (TSX:SHOP) is undoubtedly one such tech stock that has experienced remarkable growth in recent times. In this article, we will not only explore why Shopify’s stock is appealing but also introduce you to a promising alternative. While Shopify’s stock has gained significant momentum, this other stock could prove to be a better long-term investment.

The case for Shopify stock

Shopify stock has been on an impressive journey, with its shares doubling in value so far in 2023. Its gross merchandise volume (GMV) increased by 17% to $55 billion compared to the most recent second quarter, and total revenue surged by 31% to $1.7 billion. Merchant Solutions and Subscription Solutions revenues also showed substantial growth, reflecting the company’s expanding customer base and pricing changes.

However, Shopify has not been without its challenges. It is down approximately 60% from its all-time highs, indicating significant volatility in recent months. The operating loss of $1.6 billion, driven by one-time items, is also a noteworthy factor. Despite these setbacks, Shopify stock has demonstrated its ability to adapt and grow in a rapidly changing e-commerce landscape.

But is this tech stock better?

Yet while Shopify stock has some history, Topicus.com (TSXV:TOI) could be even better. The company offers investors an intriguing opportunity reminiscent of Constellation Software’s (TSX:CSU) early days. Constellation Software, a highly successful tech company, has been on the market for decades and delivered substantial returns to its investors. Topicus, established in 2021, is now following in its parent company’s footsteps.

Constellation Software’s history is marked by steady growth and strategic acquisitions. Its stock has consistently outperformed the market, making it a darling of long-term investors. Topicus, as a spin-off from Constellation, inherits a similar approach and potential for success.

Earnings prove it!

Topicus’s financial performance further solidifies its position as a promising long-term investment. In the quarter ending June 30, 2023, Topicus reported total revenues of €272.1 million, a remarkable 23% increase compared to the same period in 2022.

Over the first half of 2023, the company achieved total revenues of €536.5 million, marking a 26% increase from the previous year. These figures highlight Topicus’s impressive organic growth of 6% and 7% for the three- and six-month periods, respectively.

Net income also witnessed a substantial increase, reaching €23.5 million in the second quarter of 2023, compared to €20.1 million for the same period in 2022. The earnings per share for the quarter was €0.18, up from €0.16 in 2022. For the six months ending June 30, 2023, Topicus reported net income of €44.6 million, an improvement of €4.1 million over the same period in the prior year, translating to earnings per share of €0.35.

Additionally, Topicus showed improved cash flow from operations (CFO) and free cash flow after accounting for dividends paid to preferred securities holders. CFO increased by €14.6 million for the first half of 2023, reflecting 10% growth compared to 2022. Free cash flow after subtracting the dividends paid increased by a substantial 153%, reaching €88 million.

Bottom line

In conclusion, while Shopify stock has garnered significant attention and exhibited impressive growth, it is not without its challenges and volatility. On the other hand, Topicus stock, a spin-off from the successful Constellation Software stock, offers investors a unique opportunity. Investors can pick up a company with a promising future and the backing of a successful parent company.

Topicus’s strong earnings and growth potential make it an attractive long-term investment option. As we look ahead, Topicus’s history may come to resemble that of Constellation Software, making it a compelling alternative to Shopify for those seeking stability and growth in their tech stock portfolio.

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 Amy Legate-Wolfe has positions in Shopify. The Motley Fool has positions in and recommends Shopify and Topicus.com. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

More on Tech Stocks

Businessman holding AI cloud
Tech Stocks

ALERT! 1 Undervalued AI Stock I’m Buying Today

I’m looking to snatch up an undervalued AI stock like Docebo Inc. (TSX:DCBO) as we pass through the midway point…

Read more »

money cash dividends
Tech Stocks

These 2 Stocks Might Be Getting a Little Too Expensive

As the TSX Composite Index recovers from fear of interest rate hikes, tech and oil stocks made a high, making…

Read more »

path road success business
Tech Stocks

These 2 Meme Stocks Have Legitimate Long-Term Upside

Two Canadian ‘meme’ stocks are serious investment options for their long-term upside due to improving financial results.

Read more »

Businessman holding AI cloud
Tech Stocks

Unleash Your Portfolio’s Potential With AI Stocks

Despite its recent rally, Nvidia stock surprisingly appears undervalued on this metric right now.

Read more »

warning or alert
Dividend Stocks

How Safe Are These 3 Brutally Discounted Stocks?

A financially strong company with a healthy and relevant business model can be a great pick at a discounted price,…

Read more »

A stock price graph showing growth over time
Energy Stocks

Rising from the Ashes: Canadian Stocks Bouncing Back Stronger

Three Canadian stocks, the top losers last year, have risen from the ashes and bounced back as 2023’s big winners.

Read more »

tsx today
Tech Stocks

TSX Today: What to Watch for in Stocks on Thursday, September 14

After the release of hot U.S. consumer inflation data in the last session, wholesale inflation numbers will remain on TSX…

Read more »

value for money
Tech Stocks

3 Canadian Growth Stocks I’d Buy Under $30

These under $30 stocks have solid growth prospects and could outperform the broader market by a wide margin.

Read more »