Shopify (TSX:SHOP) might not be the cheapest stock on the TSX, but it just might be the most exciting. For investors with a long time horizon and a tolerance for short-term swings, this is a Canadian growth stock with global reach and the potential to turn a modest investment into something much bigger over time.
What happened?
The past year has been a reminder of what Shopify is capable of when it hits its stride. Shares are up more than 85% over the last year, riding a wave of stronger earnings, accelerating growth, and sharp execution. After a bumpy ride in 2022 and early 2023, the growth stock refocused, streamlined, and went on the offensive. That reset is now paying off. In its most recent quarter, Shopify posted revenue of $10 billion on a trailing 12-month basis, up 31% year over year. Earnings growth was even more impressive, with net income surging to $2.34 billion and earnings per share (EPS) landing at $2.49, a massive 430% improvement from last year.
One of the most compelling things about Shopify is that it’s still in growth mode, but it’s doing so with discipline. The growth stock’s free cash flow margin sat at 16% last quarter, and it’s now delivered eight consecutive quarters of double-digit cash flow margins. That’s rare for a high-growth tech company and shows that Shopify balances innovation with real financial strength. It also helps that it’s sitting on more than $5.8 billion in cash with minimal debt, giving it plenty of flexibility for acquisitions, product development, or just weathering any unexpected storms.
More to come
Shopify’s business model remains incredibly attractive. It earns revenue from subscriptions and merchant services, giving it recurring income while still benefiting from the rising tide of global e-commerce. That dual revenue engine helped the growth stock scale fast. From solo entrepreneurs to billion-dollar brands, Shopify has become the go-to e-commerce infrastructure provider. And with more merchants moving online and choosing Shopify to build storefronts, the opportunity is still enormous.
Geographically, the growth story is far from limited to North America. Management noted in the latest earnings call that Europe was a particular highlight, with gross merchandise volume up 42% on a constant currency basis. The Asia Pacific region also showed strong momentum. Shopify’s ability to grow internationally means it’s not just betting on one economy, but building the rails for global commerce.
Future focus
Looking ahead, management expects revenue to grow at a mid-to-high 20s pace through the rest of the year. Gross profit should rise at a slightly slower clip, but the growth stock remains profitable and disciplined. Operating expenses are being held steady as a percentage of revenue, which should help earnings continue to expand. Stock-based compensation will remain a factor, but even after adjusting for it, Shopify’s core performance is strong.
Of course, no growth stock that trades at a forward price-to-earnings (P/E) ratio above 90 is without risk. Shopify’s valuation leaves little room for major disappointments. A slowdown in e-commerce growth, rising competition from peers or smaller platforms, or global economic weakness could dent near-term results. But for long-term investors, the story is about more than the next few quarters. It’s about where Shopify is going over the next decade.
Foolish takeaway
If you’re looking for a Canadian growth stock with the potential to deliver outsized gains, Shopify fits the bill. It’s already made many early investors millionaires, but the growth stock still has a long runway ahead. E-commerce is still expanding, new verticals like point-of-sale and logistics are ramping up, and the global merchant base is growing. A small investment now won’t change your life overnight. Yet over time, it could grow into something that truly moves the needle. That’s the kind of growth story worth watching and owning.
