Want to beat Wall Street? Buy and hold this growth stock
Growth stocks seem to be going out of fashion faster than last night’s leftovers. But just because a stock price has gone down doesn’t mean anything has fundamentally changed in the company. Right now, we’re seeing plenty of stocks that may have been inflated in price coming down to earth, which could make them attractive buys at current prices. payment provider Bill.com Holdings (INVOICE 7.52%) is a fast-growing company, but it’s still not cheap, even down 56% this year. Here’s why, despite this, it’s likely to outperform the broader market over the long term.
Payments as simple as 1,2,3
Bill.com operates a payment platform for small and medium businesses. It automates accounts receivable and invoicing with various packages using a software as a service (SaaS) model, and it easily integrates into many popular accounting software systems. This makes it a no-brainer for businesses looking to free up labor and collect payments faster and with less hassle, so it’s no wonder the business has grown by leaps and bounds. .
In the third fiscal quarter of 2022 (ended March 31), sales increased 179% year-over-year. Bill.com’s total payments volume (POS) for Bill.com was $55 billion, and it sees a $125 trillion global market opportunity in business-to-business POS. The company’s net loss widened, but the loss per share of $0.08 was half Wall Street’s consensus expectation of $0.16. As for the outlook, he expects a 162% increase in sales for the full year and a net loss of around $35 million.
Bill.com is expanding its services through acquisitions to offer a wider range of products and cater to a wider audience. Last year he bought Divvy, an expense management system, and recently he followed that up with Invoice2go, a mobile invoicing platform. At the end of the third quarter, Bill.com served more than 146,000 customers, with more than 18,000 Divvy users and 200,000 Invoice2go users. It sees a global market of 70 million small businesses and sole proprietors worldwide to whom it can market its services, in addition to large enterprise clients.
CEO René Lacerte said: “We had an excellent quarter thanks to strong demand for our solutions. It’s not an inspirational quote, but it should tell investors about the potential here, as it highlights the type of demand that exists and why there are so many opportunities for this business.
A note to keep in mind is that without the acquisitions, the growth is not as impressive. Organic base revenue grew 74% year-over-year to $102.1 million, excluding Divvy and Invoice2go revenue of $63.4 million. It’s still not too shabby, but it’s not triple digits. Without new acquisitions and potentially higher losses to pay for them, Bill.com’s growth could slow significantly.
Pop the balloon
Until recently, Bill.com was one of a series of growth stocks benefiting from a rising price and high valuation – too much to bear. With growth stocks falling, investors can now find bargains. I’m not sure Bill.com would quite qualify in this category with its price-to-sales ratio of 21, but that’s still less than half its valuation from just a few months ago. Given its growth prospects and performance, that multiple now looks much more compelling.
Bill.com is not only exciting for its growth metrics, but also for its ambition. The company is strategically adding assets to capture a larger share of its vast market. With a long streak of growth ahead for this fintech favorite, now might be the time to buy.