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.
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.