Shopify (SHOP 1.61%) recently announced a 10-for-1 stock split that will go into effect on June 28 for shareholders of record on June 22, assuming it passes shareholder approval. This means Shopify's current share price of $439.50 would be $43.95 after the split.

While the lower share price might boost demand for the stock, it would likely prove temporary. What sustains long-term stock price appreciation is business performance. That is why the recent fall in Shopify's share price seems like a good buying opportunity. Nearly 600 million shoppers transacted with Shopify merchants in 2021, which is an increase of 31% over 2020.

It seems almost every online store I come across uses Shopify for the checkout process, and that has me considering buying shares for at least three reasons.

An online shopper buying something with a mobile phone.

Image source: Getty Images.

1. Sustained revenue growth

Shopify's business is easy to understand. It makes money from selling subscriptions to tools that help businesses open and manage online storefronts. Shopify offers additional services -- what the company calls merchant solutions -- for payment processing (Shopify Payments), shipping and fulfillment, loans (Shopify Capital), and even apps through the Shopify App Store. 

Competition across e-commerce is increasing, and that's one reason merchants are adopting Shopify. In 2021, revenue increased 57% year over year to $4.6 billion, with most of that growth coming from merchant solutions. This means businesses are continuing to adopt additional services after subscribing, which speaks volumes about Shopify's value proposition.

SHOP Revenue (TTM) Chart

SHOP Revenue (TTM) data by YCharts

2. Growing free cash flow

One knock against Shopify has been that the business doesn't report a profit. However, the growth of higher-margin merchant solutions has reversed the company's fortunes. For 2021, Shopify reported adjusted net income of $814 million, or $6.41 per share. 

On a free cash flow basis, which shows the actual amount of cash the business generated, Shopify also showed improvement, going from negative cash generation to positive over the last few years.

SHOP Free Cash Flow Chart

SHOP Free Cash Flow data by YCharts

3. The stock offers better value

Shopify's business is continuing to grow, and free cash flow is starting to build, which is great to see. Improving fundamentals make the stock's lower price-to-sales (P/S) ratio very tempting, currently hovering just above 12 times sales. That is much more attractive than the 60 times sales it sold for a year ago.

SHOP PS Ratio Chart

SHOP PS Ratio data by YCharts

What's not to like? Revenue growth is expected to slow in 2022 as the pandemic-driven e-commerce surge begins to fade. Plus, competition is intensifying. Amazon just announced the Buy with Prime program, which expands fast delivery and free shipping offers to merchants that sell using Amazon, which could put Shopify in the tech titan's crosshairs. 

But again, that's why investors can buy Shopify at its cheapest valuation in three years. The stock is still fairly expensive, but as the valuation comes down, I'm warming up to the possibility of starting a position.