Five9 (NASDAQ:FIVN) has been a hot topic ever since the cloud contact center provider's shareholders rejected Zoom Communication's (NASDAQ:ZM) $14.7 billion takeover bid in late September.

The bulls believe Five9 still has room to grow as a stand-alone company, while the bears believe its lack of profits and high valuation could limit its upside potential. Let's see which thesis makes more sense.

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What the bulls will tell you about Five9

Five9's cloud-based software enables contact centers to manage and optimize their customer interactions across voice, chat, email, web, social media, and mobile channels. Its clients can directly access Five9's cloud services or integrate them into their own apps with a few lines of code.

Five9 was founded in 2001 and went public in 2014, but it's still growing rapidly. Its revenue rose 33% to $434.9 million in 2020, its adjusted gross margin expanded from 64.2% to 65.5%, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 41% to $85.7 million.

In the first half of 2021, Five9's revenue increased another 45% year over year to $281.7 million. Its adjusted gross margin dipped from 64.9% to 63.7%, but its adjusted EBITDA still increased 43% to $46.2 million.

Five9 attributes its growth to the market's robust demand for AI-powered automation services, new tools for digital channels, and other services which are replacing on-premise contact centers. It's been pulling big enterprise customers away from Cisco (NASDAQ:CSCO) and Avaya (NYSE:AVYA), and continues to generate strong bookings growth in overseas markets.

Five9's services can be integrated into dominant cloud-based customer relationship management (CRM) platforms like Salesforce (NYSE:CRM). Therefore, it will likely benefit from the same digitization, optimization, and automation tailwinds that are boosting Salesforce's long-term revenue.

For the full year, analysts expect Five9's revenue and adjusted earnings per share (EPS) to rise 35% and 4%, respectively. Next year, they expect its revenue and adjusted EPS to grow 23% and 31%, respectively.

It's easy to see why Five9 rejected Zoom's takeover offer. On its own, Five9 faces fewer post-pandemic headwinds than Zoom, which should experience slower growth as more people return to work and school.Zoom also planned to fund the entire deal in stock, but its stock price had declined significantly since the deal was initially announced in July.

What the bears will tell you about Five9

Five9's growth rates look impressive, and it might have a brighter future as a stand-alone company than as a subsidiary of Zoom. However, the bears will point out that it can't generate any profits on a generally accepted accounting principles (GAAP) basis yet.

In fact, Five9's GAAP net loss widened from $4.6 million in 2019 to $42.1 million in 2020. In the first half of 2021, it net loss widened year-over-year from $23.5 million to $28.9 million. The major culprit was its stock-based compensation, which rose 50% year over year to $45.8 million -- or 16% of its revenue -- in the first half of 2021.

As a result, Five8's cash and equivalents declined 25% year over year to $175.2 million in the second quarter, while its number of outstanding shares rose 7%. It's also still liable for a whopping $773.6 million in convertible senior notes, which were mainly issued in a big offering last year, on its balance sheet -- which gives it a debt-to-equity ratio of nearly 6.0.

By comparison, Zoom, which is firmly profitable on a GAAP basis, ended last quarter with a debt-to-equity ratio of just 0.4. Therefore, it might have been smarter for Five9 to merge with Zoom's more financially stable business to narrow its losses and reduce its leverage.

Five9's stock also isn't cheap while trading at about 154 times forward earnings and 18 times this coming year's sales. That high valuation, which actually represents a discount of more than 25% from Zoom's initial $14.7 billion offer, might limit the stock's upside potential in this frothy market.

Is Five9's stock worth buying?

Five9's top-line growth and adjusted earnings look healthy. It only faces a handful of competitors in the cloud contact center market, and it could still attract higher bids from bigger tech companies in the future. But its widening losses, high leverage, and frothy valuations still represent major risks.

I think Five9's stock could be worth nibbling on at these levels, since it's riding high on some strong secular tailwinds. But I'd still consider it to be a speculative growth stock instead of a reliable one.

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.