This Stock Is Still Deep in the Red, but the Business Has Already Turned

Lightspeed’s stock is still down 90% from its peak, but the business is starting to look like a real turnaround.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Favorite Investment Quote

“October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 19, 9:30 pm EDT

| More on: LSPD

Key Points

A real turnaround needs improving fundamentals, not just a lower share price and a hopeful story.
Lightspeed is growing organically and shrinking its losses after refocusing, making today’s valuation look less demanding.
Free cash flow is still negative, so treat it as a small, higher-risk position until cash generation turns durable.

A stock chart can look like a staircase to the basement even after the business has found the elevator up. That gap can create a terrific buying opportunity, although there are a few points to check on.

technology moves fast — Source: Getty Images

How to spot a real turnaround

Share prices reflect expectations. When a former market darling is priced for flawless growth, one disappointment can crush both its earnings outlook and the multiple investors will pay for those earnings. The business may recover within a few years, while the stock remains buried under memories of what went wrong.

A lower share price alone proves nothing. Investors should look for improving revenue quality, tighter spending, a stronger balance sheet, and a credible path from adjusted profit to actual free cash flow. Cost cuts can make one quarter prettier, but growing recurring revenue while narrowing losses suggests the underlying machine is being repaired.

The reward comes when results improve before investors trust returns. A company no longer needs to reclaim an absurd old valuation to produce an excellent return from today’s much lower starting point, which brings one battered Canadian technology name back into the conversation.

LSPD

Lightspeed Commerce (TSX:LSPD) recently traded roughly 91% below its 2021 peak of $165.87. Anyone who bought near the top may wish to look away for a moment. Yet investors buying today own a much leaner company than the acquisition-hungry business the market once priced for perfection.

Lightspeed stock provides point-of-sale software, payments, inventory tools, and analytics to retailers, restaurants, and golf businesses. It earns subscription revenue for its software and transaction revenue when merchants process sales, allowing one customer relationship to become more valuable as additional services are adopted.

Founder Dax Dasilva has refocused Lightspeed stock on its strongest retail and hospitality markets, sold the Upserve product line, and pushed the platform toward profitable growth. Payments are becoming more deeply embedded, while new artificial-intelligence (AI) tools can help merchants build websites, analyze restaurant operations, and automate marketing. That equals one thing: customer retention.

Changing direction

Lightspeed stock’s first-quarter fiscal 2027 revenue grew 17% organically, while its net loss narrowed to just US$2.4 million from US$49.6 million a year earlier. Adjusted profit remained positive, and management maintained its full-year outlook. This isn’t a business gasping for one lucky quarter. It’s growing while getting remarkably close to breakeven under standard accounting.

Lightspeed stock also trades near 1.2 times trailing sales, a modest valuation for a software-and-payments company posting double-digit organic growth. That doesn’t make it automatically cheap, but it leaves far less optimism baked into the price than investors see with many Canadian growth stocks.

Lightspeed stock still produced negative adjusted free cash flow in the quarter, so the turnaround hasn’t reached its final form. Weak consumer spending could hurt its merchants, rivals can pressure payment pricing, and adjusted earnings remove costs that shareholders shouldn’t ignore forever. Investors considering buying stocks in Canada should treat this as a smaller growth position, not money needed for next year’s roof.

Bottom line

The old high isn’t a destination, and Lightspeed stock doesn’t need to revisit it for buyers near today’s price to do very well. If organic growth continues and the near-breakeven business begins producing consistent free cash flow, the share chart may eventually notice that the turnaround arrived before it did.