Technology stocks have the potential to grow their financials at a healthier rate, thus delivering superior returns. Given their innovative product offerings and future-oriented businesses, these companies can provide solid returns in the long run. Due to their higher return potential, they trade at a premium, thus making them riskier.
Meanwhile, let’s assess which among Nuvei (TSX: NVEI) and Lightspeed Commerce (TSX: LSPD) would be a better buy right now.
Nuvei
Nuvei offers a highly flexible and scalable technology that allows companies to transact digitally, including next-gen payment methods. Earlier this week, the company reported excellent fourth-quarter performance, with its revenue growing by 46%. Organic growth contributed 7% while acquisitions and favourable currency translation made up the rest. Its net income increased by 51% to $14.1 million. However, removing special items, adjusted net income grew by 1% to $68.6 million.
Meanwhile, the company continues to focus on developing innovative products, expanding its geographical footprint, broadening its customer base, and growing its wallet share with existing customers, which could boost its financials. Management has provided optimistic 2024 guidance, with the midpoint of its revenue and adjusted EBITDA guidance representing a 14.3% and 13.2% growth, respectively, from the previous year. Further, the management hopes to grow its top line at an annualized rate of 15 to 20% in the medium term and adjusted EBITDA margin to over 50% in the long run.
Despite its impressive fourth-quarter performance and healthy outlook, Nuvei trades over 8% lower for this year. Besides, its valuation looks cheaper, with its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples of 2.4 and 11.8, respectively.
Lightspeed Commerce
Lightspeed Commerce offers omnichannel commerce solutions for businesses. Its platform unifies online business with physical stores and further expands its business while providing global payments and financial solutions. The Montreal-based company posted a solid third-quarter performance for fiscal 2024 last month, with its revenue growing by 27% to $239.7 million. This exceeded management’s guidance of $232 to $237 million. The company’s customer base and ARPU (average revenue per user) rose during the quarter amid new product launches and expansion to new markets. Its ARPU increased by 28% to $447.
Besides, the company is witnessing an accelerated transition towards higher GTV (gross transaction value) customer locations, which is encouraging. Its Unified Payments platform aided in driving its GPV (gross processing value) by 69% to $6.6 billion while also increasing the percentage of its GTV happening through its payment solutions. Amid the top-line growth, its bottom line also witnessed a substantial improvement. Its net losses declined from $814.8 million in the previous year’s quarter to $40.2 million. However, after removing special items, its adjusted net income stood at $11.8 million, an improvement from $0.4 million in the previous year’s quarter.
However, Lightspeed’s management has been cautious about its near-term outlook amid a challenging macro environment and uncertainty over adopting the Unified Payments platform internationally. Meanwhile, the popularity of the omnichannel selling model has created long-term growth potential for the company. Besides, the payments solutions provider is expanding its product offering and geographical presence, which could allow it to benefit from addressable market expansion.
However, Lightspeed has lost over 33% of its stock value this year and is trading at an attractive valuation. It currently trades at 11.8 times analysts’ projected earnings for the next four quarters.
Bottom line
Despite the near-term weakness, both companies offer excellent buying opportunities, given their healthy long-term growth potential and attractive valuation. Meanwhile, I am more bullish on Nuvei due to the higher visibility of its growth prospects.
