Training employees is more challenging than ever because of the rise in remote work brought on by the pandemic. Learning platform Docebo (DCBO -2.24%) 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.