Growth stocks look like they're going out of style faster than last night's leftovers. But just because a stock price has declined, that doesn't mean anything has changed fundamentally about the business. Right now we see many stocks whose prices may have been inflated coming down to earth, which could make them compelling buys at current prices. Payments provider Bill.com Holdings (BILL -2.26%) is a fast-growing company, but it's still not cheap, even down 56% this year. Here's why, in spite of that, it's likely to outperform the broader market over the long term.
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Payments as easy as 1,2,3
Bill.com runs a payments platform for small- and medium-sized businesses. It automates accounts receivable and invoicing with various packages using a software-as-a-service (SaaS) model, and it's easily integrated into many popular accounting software systems. This makes it a no-brainer for businesses looking to free up manpower and collect payments faster and with less hassle, so it's no wonder the company's been growing by leaps and bounds.
In the 2022 third fiscal quarter (ended March 31), sales increased 179% year over year. Total payment volume (TPV) for Bill.com was $55 billion, and it sees a global market opportunity of $125 trillion in business-to-business TPV. The company's net loss widened, but the loss per share of $0.08 was half of Wall Street consensus expectations of $0.16. As for the outlook, it's expecting a sales increase of 162% for the full year and a net loss of around $35 million.
Bill.com is expanding its services through acquisitions to offer a broader range of products and meet a wider demographic. Last year it bought Divvy, a spending management system, and recently it followed that up with Invoice2go, a mobile invoicing platform. As of the end of the third quarter, Bill.com served more than 146,000 customers, with over 18,000 Divvy users and 200,000 Invoice2go users. It sees a global market of 70 million small businesses and sole proprietors worldwide to whom it can market its services, in addition to larger enterprise customers.
CEO René Lacerte said, "We delivered a great quarter driven by robust demand for our solutions." That's not an inspirational quote, but it should clue investors into the potential here, as it underscores what kind of demand exists and why there is so much opportunity for this company.
One note to keep in mind is that without the acquisitions, growth is not quite as impressive. Organic core revenue increased 74% year over year to $102.1 million, excluding Divvy and Invoice2go revenue of $63.4 million. That's still not too shabby, but it's not triple-digit. Without further acquisitions and potentially higher losses to pay for them, Bill.com's growth could decelerate significantly.
Popping the balloon
Until recently, Bill.com was one of a spate of growth stocks enjoying a climbing price and a heavy valuation -- too heavy to carry. With growth stocks plummeting, investors can now find great deals. I'm not sure Bill.com would quite qualify in that category with its price-to-sales ratio of 21, but that's still less than half its valuation from just a few months ago. Given its growth prospects and performance, that multiple now looks a lot more compelling.
Bill.com is not only exciting for its growth metrics but also for its ambition. The company is strategically adding assets to capture a greater share of its large market opportunity. With a long growth runway ahead for this fintech favorite, now might be the right time to buy.
