Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons Docebo Could Bring Big Returns

By Justin Pope - Jul 22, 2021 at 7:53AM

Key Points

  • Remote work is a major focal point for employees during the pandemic.
  • Docebo uses artificial intelligence and software tools to help businesses educate employees on the cloud.
  • There is a lot to like, but investors will want to pay attention to some important details.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's cloud-based learning platform might be a big winner in an increasingly digital workplace.

Training employees is more challenging than ever because of the rise in remote work brought on by the pandemic. Learning platform Docebo (DCBO -0.52%) helps businesses train their staff in an increasingly digital workplace, and investors looking for A-plus returns might want to consider these three reasons to like the stock.

1. Employers need better training tools

Employees can account for up to half of a company's spending, making people an important business asset. Filling a job opening can cost many months of salary, so effectively teaching and certifying employees can make a difference in a company's bottom line.

Remote work increased significantly during the pandemic, and as many as 75% of employees now desire work-from-home options, making it even harder for large organizations to train them.

Woman taking business class on computer

Image source: Getty Images.

According to a study by Fosway Group, a human-resources industry analyst, 94% of learning and development professionals are reconsidering their approach to employee training following COVID-19, a sign that companies are adapting to attract and keep talent.

2. A platform that makes learning digital

The Docebo Learning Suite helps businesses train employees with software tools that cover every phase of education, including:

  • Creation: making content using artificial intelligence (AI) via Docebo's Shape module.
  • Learning management system: Docebo's LMS, dubbed "Learn," handles course enrollment and lesson delivery.
  • Discover, coach, and share: enabling employees to share knowledge and expertise.
  • Learning impact: feedback on lessons.
  • Learning analytics: analyzing data to make better decisions.

Docebo works with more than 2,300 customers, including Amazon Web Services, Thomson Reuters, Hewlett Packard Enterprise, Heineken, and Denny's.

Its software is cloud-based, so employees can access it regardless of their location, and implement it quickly. Docebo highlighted a customer case study that created 3,037 courses across 26 countries in 11 languages and implemented the program in just four months.

Many competitors exist in the Learning Management System (LMS) market, but Docebo has innovated to differentiate itself. CEO Claudio Erba implements technology in every phase of his business.

It began operating as a cloud-based product back in 2012 and has been using machine learning and AI since 2018. Fosway Group has named Docebo an industry "core leader" from 2019-2021, and recurring revenue has grown by 65% per year from 2016 to 2020, more than twice the industry's rate.

3. An efficient business that can create profits

Docebo's business is based on customer subscriptions, so recurring revenue tells us how the business looks going forward. Recurring revenue grew 62% year over year in the first quarter of 2021, indicating that revenue growth continues to be as strong as in the past several years.

Docebo's growth has been efficient, burning just $9 million in cash while recurring revenue grew from $11 million in 2016 to $74 million in 2020. The business generates strong 82% gross margins, and it was cash flow positive for the first time in 2020.

The company spent 38% of its revenue on sales and marketing in 2020, causing a loss. However, Docebo's customers consistently spend more each year, and the average contract size has tripled in value since 2016. Investors will want to look for Docebo's high margins to push it toward profitability as revenue grows.

Is Docebo a buy today?

The stock trades at 27 times sales, a reasonable valuation considering Docebo's 62% growth and 82% gross margins. A research group projects the LMS market to grow 21% per year to roughly $30 billion by 2025, putting Docebo in a position to grow beyond its $2 billion market cap.

The company looks to be doing the right things. Still, investors need to pay attention to its sales and marketing expenses to see that it can become profitable. If Docebo can do that and grow simultaneously, the stock could be top of the class for investors.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Justin Pope owns shares of Docebo Inc. The Motley Fool owns shares of and recommends Amazon and Docebo Inc. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Docebo Inc. Stock Quote
Docebo Inc.
DCBO
$36.45 (-0.52%) $0.19
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$143.55 (2.07%) $2.91
Thomson Reuters Corporation Stock Quote
Thomson Reuters Corporation
TRI
$116.53 (1.00%) $1.15
Heineken N.V. Stock Quote
Heineken N.V.
HEINY
$48.86 (1.20%) $0.58
Denny's Corporation Stock Quote
Denny's Corporation
DENN
$9.90 (-0.70%) $0.07
Hewlett Packard Enterprise Company Stock Quote
Hewlett Packard Enterprise Company
HPE
$14.80 (0.89%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.