Many investors have watched their portfolios get crushed recently, with only the past few days showing slivers of green. However, this does not mean that high-growth companies are not high-quality companies anymore. Many companies have seen no fundamental changes, which should leave long-term investors optimistic about the future. 

Shopify (SHOP -0.93%) is a perfect example. The company has been hammered over the past quarter, falling over 45% off its all-time high and about 33% in 2022 alone. However, not much has changed in terms of its dominance in the e-commerce industry. Shopify is still a leading platform where small- and medium-sized businesses (SMBs) go to establish and grow their operations, and this is expected to continue into the coming quarters. With the stock down this much over the past few months, I think now could be a good time to pick up some shares.

Image source: Getty Images.

Why Shopify sank

Shopify has been crushed in line with the broad-reaching tech stock dive that has been taking place since September. Many investors are shifting out of high-growth and risker tech companies in favor of stabler companies due to interest rate and inflation fears. Already this year, the tech-heavy Nasdaq index fell about 20% off its all-time high and is 15% off its high as of this writing.

Shopify has been dragged down even more than that, being hit especially hard by the worries over inflation. Shopify's merchant-solutions revenue comes mainly from its customers on a per-transaction basis, so when its customers grow their gross merchandise volume (GMV), Shopify makes money. In the third quarter, over 70% of its revenue came from merchant solutions, but with inflation, some investors are worried about the growth of this big revenue segment. 

As the prices of goods head higher, many consumers will slow their spending on e-commerce, especially when those goods are not necessities. This will hurt Shopify's merchants and, thus, Shopify itself.

A financial powerhouse

The company reported Q3 results in November, and the financial picture did not seem to be hurt by these inflationary pressures. The company reported total revenue growth of 47% year over year to $1.1 billion, and its merchant solutions -- which investors worry are going to be hurt by inflation -- grew 51% year over year. 

Shares have been crushed because of low investor sentiment, but analysts are predicting continued expansion. Wall Steet expects $1.34 billion in Q4 revenue, which is growth of 20% sequentially and 37% year over year. While this is lower than Q3, it still represents a strong improvement. Management cited that holiday sales were larger than normal, but still underwhelming industrywide, showing that the slowing growth was not just a Shopify problem. 

At a $110 billion market cap, it is impressive that Shopify is still seeing significant growth in its top line, and its cash flows make the financials even stronger. The company brought in $219 million in free cash flow in the first nine months of 2021, and this grew over 52% compared to the year-ago period. The company has also made investments into other companies that gave its profitability a boost. Shopify earned more than $3.3 billion from other investments in the first nine months of 2021 -- namely its investment in Global-E Online -- which is more than the revenue it brought in during the same period.

The growth that remains

There are plenty of tailwinds that could continue to push Shopify in the right direction over the next decade. Shopify estimates that its total addressable market is currently worth $153 billion -- which means Shopify has captured just 3% of its total revenue opportunity. DigitalOcean -- an SMB-focused cloud provider -- estimated that the number of SMBs will grow by 14 million every year from today's current count of 100 million SMBs globally. Considering that Shopify sells primarily to SMBs, it could see major success if the industry expands as much as DigitalOcean projects.

The company is also focused on expanding its offering to make it even more appealing to its customers. Shopify has been investing in a fulfillment network to help merchants pick, pack, and ship their products across the country. This fulfillment network would not only make Shopify's product ecosystem harder to leave, but it would also allow Shopify to lower its costs to better compete against behemoths Amazon. 

Is Shopify a buy now?

The company trades at 27 times sales -- a steep multiple for an e-commerce business. For comparison, e-commerce giants like Sea Limited (SE +0.88%) and MercadoLibre (MELI +1.84%) both trade below 10 times sales. However, Shopify has the best of a few worlds: It is already dominant in the SMB space and has plenty of runways to growth via product expansion and a burgeoning addressable market of customers. While Shopify might not be the next 100-bagger over a decade, it still have room to grow tenfold from here, which is why I think Shopify is a screaming buy at its current price.