The S&P500 is the most popular barometer for the US stock market. The index entered bull market territory on October 12, 2022 and has risen 53% in the 20 months since. But history says the stock market will head higher.
The S&P 500 averaged 184% during previous bull markets, achieving these returns over a period of approximately 64 months. If the current bull market is in line with the historical average, the index will rise 131% over the next 44 months. But even if these gains don’t materialize, investors have good reason to believe the stock market will rise in the long term.
The S&P 500 has returned 2,010% over the past thirty years, which equates to an annual return of 10.7%. That period covers a sufficiently broad range of economic conditions that similar returns are likely over the next few decades. Armed with that information, patient investors should put money into the stock market today.
This is why Shopify (NYSE: STORE) And Paycom software (NYSE: PAYC) are worth buying.
Shopify: A leader in retail ecommerce software gaining momentum in wholesale
Shopify offers a turnkey solution for commerce. The platform supports sellers across physical and digital sales channels, including online marketplaces, social media and direct-to-consumer websites. The company also offers adjacent solutions for marketing, payments and logistics. Additionally, its enterprise platform, Shopify Plus, offers more functionality for larger businesses, including business-to-business (B2B) commerce tools, also known as wholesale commerce.
Last year, research agency Gartner recognized Shopify as a leading provider of digital commerce software, giving the company the highest score for its ability to execute. This year, Forrester research recognized Shopify Plus as a leading B2B commerce platform. Both reports cited rapid innovation as a key benefit. For example, Shopify recently introduced a generative artificial intelligence assistant called Shopify Magic that can write product descriptions, predict sales, edit images, and redesign storefronts.
Shopify reported solid financial results in the first quarter, exceeding expectations on the top and bottom lines. Revenue rose 23% to $1.9 billion thanks to strong growth in subscription software and merchant services. Non-GAAP (adjusted) net income was $0.20 per diluted share, compared to $0.01 per diluted share last year.
Notably, management said B2B gross merchandise volume increased 130% in the first quarter, after doubling in 2023. That’s encouraging because the B2B e-commerce market is much larger and growing much faster than the pre-market e-commerce market. retail. Straits Research estimates that B2B e-commerce sales will grow 19% annually to $31 trillion by 2031, while retail e-commerce sales will grow 8% annually to $8 trillion by 2030.
Wall Street expects Shopify to grow revenue 21% annually through 2026. That consensus estimate makes the current valuation of 11.4 times sales seem reasonable. Patient investors should buy a small position in this growth stock with confidence today.
Paycom Software: An HCM software provider trading near the cheapest valuation in history
Paycom supplies software for payroll administration and human capital management (HCM). The platform helps companies manage the entire employee lifecycle, from hiring to retirement, by integrating applications for recruiting, training, scheduling and HR functions (such as benefits administration).
The breadth of the Paycom platform is attractive because most enterprises rely on multiple vendors to meet their HCM needs. Consolidating through a single vendor simplifies the user experience and eliminates the costs associated with integrating and maintaining disparate products. For example, standardizing on one platform relieves HR administrators of the burden of entering data into multiple systems.
Paycom has distinguished itself through innovation in the field of workflow automation. In 2021, the company introduced Beti (Better Employee Transaction Interface), the industry’s first self-service payroll solution. Beti automates payroll by requiring employees to review and approve their paychecks before processing them. In 2023, the company introduced Gone, a feature that allows companies to automate decisions about employee leave requests.
Paycom reported fairly good financial results that exceeded expectations in the first quarter. Revenue rose 11% to $500 million, while non-GAAP net income rose 5% to $2.59 per diluted share. Growth declined on the bottom line due to investments in product development. On that topic, CEO Chad Richison said Paycom’s payroll software is now available in Ireland, its fourth-largest international market alongside Canada, Mexico and the United Kingdom.
Wall Street expects Paycom to grow earnings per share 10.4% annually. That consensus estimate makes the current valuation of 17.7 times earnings seem quite reasonable. Paycom is currently trading near the cheapest price-to-earnings ratio in history. I think the stock has a good chance of beating the market over the next three to five years.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, you would have $20,589!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $40,491!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $369,776!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns June 11, 2024
Trevor Jennewine has positions in Paycom Software and Shopify. The Motley Fool holds and recommends positions in Paycom Software and Shopify. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
History Says the Stock Market Will Rise: Two Great Growth Stocks to Buy Now for the Bull Market was originally published by The Motley Fool
