Supported by the Bank of Canada’s interest rate cut last week, the S&P/TSX Composite Index is up 4.4% for this month and is trading 20.6% higher year to date. Despite positive investor sentiment, the following two TSX stocks have lagged the broader market and are trading well below their recent highs. Given their robust growth prospects and undervalued prices, these stocks represent compelling long-term investment opportunities.
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Lightspeed Commerce
Lightspeed Commerce (TSX:LSPD) offers point-of-sale and payment platforms to businesses in over 100 countries. The company’s products and services enable enterprises to streamline operations, drive expansion, and enhance customer experiences. The company has been under pressure over the last few months, with its stock value declining by around 37% from its 52-week high. The rising competition, challenging macro environment, and its failed attempt to secure a sale during a strategic review process appear to have weighed on the company’s stock price.
Amid the steep correction, Lightspeed’s valuation appears reasonable, with its NTM (next-12-month) price-to-sales and NTM price-to-earnings multiples at 1.3 and 23.1, respectively. Meanwhile, the shift toward omnichannel selling supports the company’s strong long-term growth outlook. Additionally, it is broadening its portfolio through innovative product launches and expanding its payment platform into new markets, which could help grow its customer base and boost its average revenue per user. Additionally, it has adopted artificial intelligence (AI) to enhance productivity while reducing expenses.
Amid these growth initiatives, the company’s management projects its gross profits and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to grow at CAGRs (compound annual growth rates) of 15-18% and 35%, respectively, for the next three years. Considering its healthy growth prospects and discounted valuation, I believe Lightspeed will deliver superior returns over the next three years.
Docebo
Next on my list is Docebo (TSX:DCBO), whose stock has declined by roughly 36% from its 52-week high. The expectation of growth slowing down amid rising competition and the departure of key executives has weighed on the e-learning platform’s stock price. Meanwhile, the company had posted an impressive second-quarter performance, with its top line and adjusted EBITDA growing by 14.5% and 16%, respectively. Its EBITDA margin also improved 20 basis points to 15.2%, while generating free cash flows of $11.4 million during the quarter.
Moreover, the LMS (Learning Management System) market is growing, driven by the rise of e-learning and remote work, ongoing technological advancements, and the system’s scalability, flexibility, and convenience. Meanwhile, Grand View Research projects that the global LMS market will grow at a 19.9% CAGR through 2030. Meanwhile, Docebo has developed and launched several AI-powered products and is actively enhancing its platform to strengthen customer engagement and drive growth. Additionally, most of its customers opt for multi-year contracts, thereby providing stability to its financials. Amid these growth initiatives, Docebo’s management projects its 2025 topline to grow by 10-11%. The management is also hopeful of improving its adjusted EBITDA margin from 15.5% in 2024 to 17-18% this year.
Amid the recent correction, Docebo’s NTM price-to-sales and NTM price-to-earnings multiples have declined to 3.4 and 21, respectively. Given its healthy growth prospects and reasonable valuation, I believe Docebo would be an excellent addition to your long-term portfolio.
