While tech stocks have staged a remarkable comeback since the bear market of 2022, Lightspeed Commerce (TSX:LSPD) continues to trail the broader indices. Most equity indices, such as the S&P 500 and TSX 60, are trading near all-time highs, but LSPD stock is down 87% from record levels.
Valued at a market cap of US$2.32 billion, Lightspeed Commerce offers a fintech platform to small and medium enterprises, primarily in the restaurant industry. Lightspeed’s sales increased from US$221.7 million in fiscal 2021 (which ended in March) to US$909 million in fiscal 2024, primarily due to acquisitions.
The rapid expansion in the top line meant LSPD stock soared from $27 in May 2019 to over $160 in September 2021. However, a scathing report from Spruce Point, a noted short-seller, drove LSPD shares lower.
In late September 2021, Spruce Point accused Lightspeed of inflating its total addressable market, customer counts, and gross transaction volume (GTV). Spruce Point claimed it found evidence that Lightspeed inflated its business pre-IPO (initial public offering) and overstated its customer count by 85% and GTV by 10%.
The short-seller also stated, “We believe that Lightspeed’s recent acquisition spree has come at escalating costs with no clear path to profitability while management pursues aggressive revenue reporting practices.”
Is LSPD stock a good buy right now?
Lightspeed Commerce is a beaten-down growth stock that is forecast to increase sales to US$1.1 billion in fiscal 2025 and to US$1.32 billion in 2026. An asset-light model should help Lightspeed improve profit margins significantly and benefit from operating leverage. The company is on track to improve earnings from US$0.16 per share in 2024 to US$0.34 per share in 2025 and US$0.53 per share in 2026.
So, priced at 44.5 times forward earnings, LSPD stock trades at a 20% discount to consensus price targets. However, I believe this top TSX stock is a much better buy at the current valuation. Let’s see why.
Bombardier stock has staged a turnaround
While LSPD stock is down in the dumps, Bombardier (TSX:BBD.B) stock is up 283% in the last three years.
Bombardier has increased its sales from $6 billion in 2021 to $8 billion in 2023. While it reported an operating loss of $269 million in 2021, it ended 2023 with an operating income of $8 billion. In the last two years, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by a factor of more than four times to 15% in 2023.
Its robust performance has put the company on track to end 2025 with sales of $9 billion, adjusted EBITDA of $1.625 billion, and free cash flow of $900 million. While Bombardier has $6 billion in debt, it aims to maintain a net leverage ratio of between 2 and 2.5 times.
Moreover, a focus on cost optimization should help it end 2024 with adjusted earnings per share (EPS) of $5.72. Analysts expect EPS to surge by 58% to $9 per share in 2025, indicating the TSX stock is priced at less than 10 times forward earnings. Despite its sizeable returns since 2021, Bombardier stock should continue to outpace the broader markets, given its earnings forecasts.
