E-commerce sales made up roughly 14% of total U.S. retail sales in 2020. That is roughly three times the proportion of total retail sales compared to 10 years ago, pointing to an unstoppable secular trend.

Three growth stocks with an e-commerce focus that investors should keep their eyes on are PayPal Holdings (NASDAQ:PYPL), Etsy (NASDAQ:ETSY), and Shopify (NYSE:SHOP). These companies continued to post stellar earnings results in the first quarter. But all three are trading well off their price highs set in mid-February and early March.

Let's look at how these companies performed and whether they are still good investments at current price levels.

A person's hands placing a shipping label on a box.

Image source: Getty Images.

1. PayPal

PayPal's total payment volume surged 50% year over year to reach $285 billion in the first quarter. The performance on the bottom line was also strong, with non-GAAP earnings per share up 85% year over year to $1.22. 

"Demand for our PayPal and Venmo QR codes and in-store payments remains strong, with an additional merchant signing up every 28 seconds," CEO Dan Schulman said during the company's earnings call. 

Management's outlook calls for total payment volume, revenue, and adjusted earnings to grow approximately 30%, 20%, and 21%, respectively, year over year for 2021. 

The stock is more expensive than it was a year ago, trading at a forward price-to-earnings (P/E) ratio of 51, compared to around 30 times earnings before the pandemic. That might limit near-term return potential, but I believe PayPal shares could double again over the next five years if the company continues to deliver around 20% annual earnings growth.

2. Etsy

Etsy's consolidated gross merchandise sales soared 132% year over year to reach $3.1 billion in Q1. That translated to revenue growth of 141%, showing why the stock price nearly doubled over the last year. 

Higher margins led to profits skyrocketing 1,048% year over year to $144 million. Etsy saw gross margin improve by 10 percentage points, fueled by momentum in its Offsite Ads business and Reverb's higher transaction fees compared to the year-ago quarter. 

Etsy acquired Reverb, a leading online marketplace for musical instruments, in 2019 for $275 million, and it seems to be working out well so far. "GMS grew about 50% or about 5x faster than the musical instrument industry, and Reverb continues to deepen its moat, serving as the primary marketplace for many musicians," CEO Josh Silverman said during the Q1 earnings call. 

The stock is down 7.5% year to date and sold off following the Q1 earnings report. A key reason for that is management's lower guidance for the second quarter, which calls for revenue growth of 15% to 25% year over year. That's a far cry from the triple-digit rates during the pandemic. 

However, Etsy offers the lowest valuation among the three e-commerce stocks featured here, which might set the shares up for relatively better performance in the near term. The stock currently sells for a forward P/E of 46 and a price-to-free-cash-flow multiple of just 29. 

3. Shopify

Shopify delivered a very impressive quarter, with revenue growth accelerating to 110% year over year. Adjusted earnings per share came in at $2.01, up from just $0.19 in the year-ago period. 

"Shopify's momentum continued into 2021 as digital commerce tailwinds remained strong and merchants took advantage of the range of capabilities offered by our platform," CFO Amy Shapero said in the company's first-quarter earnings release. 

The stock initially bounced higher on the earnings news but has since fallen sharply. Management didn't provide specific guidance but expects the business to grow "rapidly" in 2021, though at a lower rate than last year. 

After Shopify stock rocketed 4,000% over the last five years, investors need to be vigilant about this one. Shopify is the most expensive stock here, with a steep price-to-sales multiple of 39 and a forward P/E of 248.

PayPal and Etsy offer good growth prospects at relatively lower valuations, which would be my preference right now. But some investors still like Shopify even at these lofty levels.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.