For investors in Canadian technology giant Shopify Inc. (TSX:SHOP)(NYSE:SHOP), the dizzying share price growth experienced in a very short period of time is reminiscent of some of the best tech companies out there. Shares have breached the $500 mark, eclipsing the company's initial public offering (IPO) price of $17 seem absurd, and making investors who held on for the wild ride vastly wealthy.
The story is impressive, and the company continues to churn out growth in a way that few other companies can in today's world. Shopify appears to have its fangs into every small to medium sized business, offering an impressive suite of products that makes going with the competition seem insane. That said, there are a couple of key issues here I think investors need to focus on, in addition to this impressive growth story.
Earnings have remained elusive, and though the company is not burning through a ton of cash (and has used debt very sparingly), the reality is the fundamental numbers don't look good at this point in time. I know, the situation is bound to change sometime, but anytime I see negative return on equity (ROI) and return on asset (ROA) numbers, I get worried. While the company needs to remain focused on top line growth (this is what investors are after), my concern is that shareholders are one earnings miss away from a significant blow, making jumping in at these levels a dangerous exercise.
Invest wisely, my friends.
