Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

3 “Expensive” Stocks That Could Give You Crazy Returns

Stock MarketsJun 14, 2021 09:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
3 “Expensive” Stocks That Could Give You Crazy Returns

Experienced investors and those committed to following strict investment guidelines often use valuations to determine whether a stock would make a good buy at that time. Examples of these metrics include price to earnings (P/E), price to sales (P/S), and price to book (P/B). Unfortunately, many investors use these metrics improperly. In addition, these metrics are largely useless when assessing companies in the high-growth phase of its business. For example, it’s impossible to evaluate a company on its P/E if it has no earnings.

Focusing on P/S and P/B, I will discuss three stocks that look very expensive according to popular valuation metrics. Investing in these companies today could seem like an excellent financial decision years down the road, regardless of what valuation metrics indicate.

A top stock in 2020 Last year, Docebo (TSX:DCBO)(NASDAQ:DCBO) was one of the brightest stars on the TSX. The company’s main offering is a cloud-based, AI-powered, eLearning platform for enterprises. Soon after its IPO in October 2019, the COVID-19 pandemic caused its stock to crash about 35%. However, investors quickly realized that Docebo could be essential to the success of many businesses. As a result, Docebo stock soared more than 650%. Unfortunately, this year has been rough. The company has lost 16% of its value, as of this writing.

Even at these depressed levels, Docebo stock trades at a premium according to its valuation multiples. Value investors usually hope for P/S ratios under 2, Docebo’s P/S is currently about 31. In addition, it has a P/B over 11, whereas investors usually look for ratios under one. Despite these indications that Docebo is overvalued, the stock could see a lot of growth moving forward. Developments like its multi-year partnership with Amazon (NASDAQ:AMZN) will do a lot in pushing its price higher. Docebo has all of the makings to be a top stock for years.

This stock was a market favourite last year Lightspeed (TSX:LSPD)(NYSE:LSPD) is another company that held its IPO in 2019. Like Docebo, Lightspeed saw its stock plummet at the start of the pandemic. Investors were worried about the company’s exposure to small- and medium-sized businesses that were disproportionately affected by the COVID lockdowns. However, Lightspeed’s founder and CEO, Dax DaSilva, managed to make all of the right moves, which ended up allowing many of its businesses to thrive during the pandemic.

As a result of the quick thinking by Lightspeed’s management team, the company saw its stock gain more than 600% since hitting its lowest point after the March crash. Today, Lightspeed has a P/S ratio of about 52. Value investors wouldn’t touch this stock with a 12-foot pole. However, Lightspeed is quickly becoming an international leader in POS systems among small- and medium-sized companies. Today, the company is present in more than 100 countries and serves about 140,000 customers. This is just the beginning.

Canada’s top growth stock It shouldn’t come as a surprise that Shopify (TSX:SHOP)(NYSE:SHOP) is listed among the most expensive growth stocks in Canada. Shopify stock has been on a tear since its IPO, and rightfully so. Since going public, Shopify’s revenue growth has continued to increase at a rapid pace. In 2020, the company reported a revenue increase of 86% year over year. This year, Shopify reported a 110% increase in its Q1 revenue. Clearly, the company isn’t done growing.

Shopify’s P/S ratio is slightly below 55, as of this writing. Its PB is perhaps even more mind-blowing, which is currently above 20. However, it’s not very hard to believe that buying Shopify today wouldn’t be a great opportunity for growth — especially if the company continues to grow as it has been over the past few years.

The post 3 “Expensive” Stocks That Could Give You Crazy Returns appeared first on The Motley Fool Canada.

Fool contributor Jed Lloren owns shares of Shopify. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Amazon, Docebo Inc., Lightspeed POS Inc, and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify.

This Article Was First Published on The Motley Fool

3 “Expensive” Stocks That Could Give You Crazy Returns

Related Articles

TFSA Investors: 2 Stock to Earn Tax-Free Dividends
TFSA Investors: 2 Stock to Earn Tax-Free Dividends By The Motley Fool - Jul 23, 2021

How much of what you earn goes in the CRA’s pocket? No matter your exact tax rate, your answer would most likely be “a lot.” And it’s true. While taxes in...

1 Cheap 5G Stock to Buy on the TSX Now
1 Cheap 5G Stock to Buy on the TSX Now By The Motley Fool - Jul 23, 2021

While the COVID-19 pandemic caused significant uncertainty and brought about rapid change in how business is conducted, it also highlighted the resiliency and financial strength of...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email