Looking at stocks that have crushed the market can give investors mixed feelings. Some may have owned the stock along the way and benefited from appreciation. Others may have missed out and can only look back in regret.

Shopify (SHOP 1.25%) has hammered the market, returning more than 340% and 3400% over the last two and five years, respectively. While no one can go back and purchase shares, investors may have a second chance with Lightspeed (LSPD 2.12%). It provides point-of-sale systems (POS), e-commerce software, and other tools necessary to run a business. Can it challenge Shopify over the next decade? 

Person interacting with point-of-sale system.


Serving more industries than Shopify

Lightspeed does not limit itself to just commerce like Shopify does. Instead, it operates three segments: commerce, restaurants, and golf. For golf, it provides tee-time management and restaurant POS streamlining course operations. Additionally, its software can be used on a mobile device so beverage carts don't need additional equipment. It has signed more than 1,200 courses worldwide, including Florida's Wellington National Golf Club, a top 75 private golf course.

The restaurant industry can be tricky in today's landscape; customers want the flexibility to order in-house, pick up, or get their meal delivered. Lightspeed has its clients covered with many solutions. It is integrated with UberEats and DoorDash and plugs into its POS solution. One of Lightspeed's unique solutions is letting restaurant customers order and pay from their phones, speeding up the ordering process, and reducing the need for excess waiters. Loyalty programs aren't only for large restaurant chains; even the humblest establishment can create a rewards system through Lightspeed.

Lightspeed's largest segment is retail, where it competes with Shopify. In general, Shopify is focused on e-commerce and supports a physical presence as well. Lightspeed runs everything through its physical POS, making it a great option for enhancing brick and mortar stores' operations and providing an omnichannel presence. Still, Lightspeed's solution gives its users many features, like gift cards that are accepted online and in-store, POS integrated inventory, and loyalty programs.

Shopify is larger, but Lightspeed seems to be growing quicker

Explosive growth in the e-commerce space was common during last year because of COVID-19. Now, many companies are struggling against tough comparisons. Lightspeed is not experiencing these hardships and is growing, well, at the speed of light. Its second-quarter revenue ending Sept. 30 increased 193% over the previous year. In total, Lightspeed's revenue was $133 million with subscription sales making up 45%.

Lightspeed has no customer-concentration risk and is diversified across more than 100 countries and 156,000 customer locations. Sixty-two percent of revenue comes from retail and the other 38% is derived from the restaurant and hospitality business. Worldwide expansion is already underway, as 47% of revenue is sourced outside North America.

For its fiscal year ending March 31, 2022, Lightspeed is expecting revenue between $520 to $535 million, representing 138% growth at the midpoint. For comparison, Shopify's Q3 revenue was $1.1 billion alone and grew 46% year over year. However, Shopify's split between transaction and subscriptions revenue is different than Lightspeed's.

Company Last-Quarter Subscription Revenue Percentage of Subscription Revenue Last-Quarter Transaction Revenue Percentage of Transaction Revenue
Lightspeed $59.4 47.8% $65.0 52.3%
Shopify $336.2 29.9% $787.5 70.1%

Source: Lightspeed and Shopify. Values in millions of dollars. Does not include Lightspeed's hardware revenue.

As more merchants use Lightspeed and grow, Lightspeed's transaction revenue will rise quicker than a subscription. Q2 results demonstrated this where subscription and transaction revenue grew 132% and 320%, respectively. Lightspeed is growing at a rate Shopify has never touched.

SHOP Revenue (TTM) Chart

SHOP Revenue (TTM) data by YCharts

If Lightspeed can mirror Shopify's chart, the stock will be a huge win. Lightspeed is also cheaper than Shopify; it trades at a 15 price-to-sales (PS) ratio versus Shopify's 44. For a stock with 100% plus growth, a PS ratio of 15 is not an expensive price to pay.

Lightspeed and Shopify have many similarities: Both are Canadian companies that are led by founders and help businesses transition to the digital age. If Lightspeed can grow and perform like Shopify's stock, investors have a lot to be excited about. Tailwinds are blowing in e-commerce's favor and for modernizing restaurants.

However, Shopify is an established business and will be difficult to dethrone. Lightspeed can make itself a name by providing unique solutions, but catching Shopify seems unlikely. Lightspeed still presents many captivating prospects and could be a smart buy if the allocation is kept at a level where a stock failure will not sink a portfolio.