Is Lightspeed Commerce Inc. Sub an Overvalued Stock?

Lightspeed Commerce Inc.'s price surge today seems to be confirming the bullish analyst outlook on the stock. Ending the day at $18.62, LSPD has posted 8.8% gains, pushing the valuation of the stock even higher. Might the stock be overvalued, despite its buy rating?

Lightspeed has a trailing price to earnings (P/E) ratio of -9.1 based on its 12 month trailing earnings per share of $-2.04. This means the company is not profitable currently. In comparison, the average P/E ratio of the Technology sector is 26.5 and the average P/E ratio of the S&P 500 is 15.97.

We can also compare the ratio of Lightspeed's market price to its book value. A company's book value refers to its present liquidation value -- or what would be left if the company sold off all its assets and paid off all of its debts today. Importantly, the book value does not include intangible assets such as the value of its brand and the goodwill of its customers. LSPD has a book value of 0.8, with any figure close to or below one indicating a potentially undervalued company.

A comparison of the share price versus company earnings and book value should be balanced by an analysis of the company's ability to pay its liabilities. One popular metric is the Quick Ratio, or Acid Test, which is the company's current assets minus its inventory and prepaid expenses divided by its current liabilities. Lightspeed's quick ratio is 5.283. Generally speaking, a quick ratio above 1 signifies that the company is able to meet its liabilities.

Next up in our analysis is Lightspeed's levered free cash flow, which stands at $47,586,124. This represents the cash that is available to the company after all of its expenses and income are accounted for -- including those that arise outside of its core business activities. This money can be used to re-invest in the business or to payout a dividend. For now, at least, Lightspeed Commerce Inc. Sub has chosen the former.

At Market Inference, we will keep monitoring Lightspeed Commerce Inc. Sub to see if the analysts were right to recommend the stock despite its negative earnings. We recognize that numbers don't always tell the whole story, and that qualitative factors often set high performing investments apart from the rest. To stay informed about newsworthy stocks, make sure to subscribe to our free daily newsletter!

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.