Stocks that went public in 2021 have generally done terribly for investors. Whether through a special-purpose acquisition (SPAC) merger or an initial public offering (IPO), if you were new to the public markets in 2021, your shares were likely down big in 2022.

Restaurant software provider Olo (OLO -0.43%) was one of these companies. The stock is down 76% since going public in early 2021, even though the business continues to show strong growth. This combination of a precipitously falling share price and strong financial performance can be a recipe for fantastic buying opportunities if you have a long-term time horizon.

Could Olo stock go up 10 times in value for investors this decade? Let's take a look.

Order management for large restaurants

Olo provides software to help large restaurants, convenience stores, and supermarkets manage digital orders, but it mainly services restaurants. With all the different ways people can buy food nowadays, restaurants have struggled to build custom solutions with a good customer experience, leading to demand for Olo's white-label solutions. These products include order management, delivery dispatch, connections to third-party delivery services, payments, and more.

Most of Olo's clients include restaurant chains like Portillo's, P.F. Chang's, and Five Guys. According to the company, it has 600 brands using Olo's various software programs across 84,000 restaurant locations. Olo makes money through monthly subscription fees and by taking a percentage of transactions that go through Olo Pay. As of Q3 2022, its quarterly average revenue per unit (ARPU) under management was $558.

What is the growth opportunity with Olo stock?

Management thinks Olo has a long runway to grow, with the potential to 4x its restaurant locations just in the U.S. and another large opportunity to grow within convenience stores, although it has a much smaller market share in that sector. And this is before considering any expansion internationally. Active locations at Olo grew at a 31% annual rate from 2018 to 2021. I don't think annual locations growth will be 30% over the next few years, but Olo still has an opportunity to grow its units at a double-digit rate for the foreseeable future.

On top of location growth, Olo has an impressive track record in upselling its existing clients to new software offerings. From 2018 to 2021, ARPU grew at 29% a year and was still growing 15% year over year last quarter. With new products consistently coming down the line and the potential to upgrade customers to its new Olo Pay offering (Olo Pay usage leads to Olo's revenue going up by 4x per order), I think Olo can consistently grow its ARPU along with its locations every year.

A combination of steady growth across both locations and ARPU should lead to durable revenue growth for many years. Taking its $175.6 million in trailing-12-month revenue and assuming 20% revenue growth through the end of 2030, Olo will be doing $755 million in annual sales by the end of this decade.

Can Olo stock 10x in value?

Revenue growth is great, but what really matters for driving shareholder value are earnings and cash flow. Olo is a tricky stock to evaluate as it is not profitable at the moment. However, it does have high gross margins at 71% over the last 12 months, which indicates it could have high profit margins of 25%-30% once the business matures. On $755 million in revenue, a 25% net income margin equates to $189 million in earnings by 2030.

At a current market cap of $1.15 billion, Olo's stock would have a market cap of $11.5 billion if it went up 10 times in value, assuming its shares outstanding stay the same. Dividing that by $189 million in net income equals a projected price-to-earnings ratio (P/E) of 61 in order for Olo's stock to 10x by 2030. While not impossible, I think this makes it highly unlikely that Olo will have a market cap of $11.5 billion in 2030 considering that the market's average P/E is just 20.

Regardless of whether Olo's stock will 10x from here, the company does look promising for investors with a long time horizon. If you believe Olo will keep growing its revenue at a double-digit rate and expand its margins, the stock will likely put up good returns for shareholders.