of S&P 500 The ETF is the most popular barometer of the U.S. stock market. The index entered a bull market on October 12, 2022, and has surged 53% in the 20 months since then. However, history tells us that the stock market is headed higher.
The S&P 500 has returned an average of 184% during past bull markets, and those returns came over roughly 64 months. If the current bull market matches the historical average, the index would rise 131% over the next 44 months. But even if those gains don’t materialize, investors have plenty of reason to believe the stock market will soar in the long term.
The S&P 500 has returned 2,010% over the past 30 years, with compound annual growth of 10.7%. Because of the wide range of economic conditions over this period, we can expect similar returns over the next few decades. With this information, patient investors should invest in the stock market now.
Here’s why Shopify (NYSE: SHOP) and Paycom Software (NYSE:PAYC) Worth buying.
Shopify: The retail ecommerce software leader gaining traction in wholesale
Shopify offers a turnkey solution for commerce. Its platform supports merchants across physical and digital sales channels, including online marketplaces, social media, and direct-to-consumer websites. The company also offers related solutions for marketing, payments, and logistics. Additionally, its enterprise-grade platform, Shopify Plus, has even more features for large businesses, including business-to-business (B2B) commerce tools, also known as wholesale commerce.
Last year, a research firm Gartner Shopify was recognized as a leading provider of digital commerce software, receiving the highest score possible in Ability to Execute. This year, Forrester Research Shopify Plus was recognized as the leading B2B commerce platform. Both reports cited rapid innovation as a key advantage. For example, Shopify recently launched a generative artificial intelligence assistant called Shopify Magic that can write product descriptions, forecast sales, edit images, and redesign your storefront.
Shopify reported strong financial results in the first quarter, beating expectations on revenue and profit. Revenue increased 23% to $1.9 billion, driven by strong growth in subscription software and merchant services. Non-GAAP (adjusted) net income was $0.20 per diluted share, up from $0.01 per diluted share a year ago.
Notably, management said that B2B total merchandise volume grew 130% in the first quarter, after doubling in 2023. This is encouraging as the B2B e-commerce market is much larger and growing much faster than the retail e-commerce market. Straits Research predicts that B2B e-commerce sales will grow 19% annually to reach $31 trillion by 2031, while retail e-commerce sales will grow 8% annually to reach $8 trillion by 2030.
Wall Street expects Shopify’s revenue to grow 21% annually through 2026. At this consensus estimate, its current valuation of 11.4 times sales seems reasonable, and patient investors would feel comfortable buying a small amount of this growth stock today.
Paycom Software: HCM software vendor trading near all-time lows
Paycom provides payroll and human capital management (HCM) software. The company’s platform helps companies manage the entire employee lifecycle from hire to retirement by integrating applications for human resources (HR) functions such as recruiting, training, scheduling and benefits administration.
The broad range of capabilities of the Paycom platform makes it attractive because most companies rely on multiple vendors to meet their HCM needs. Consolidating to a single vendor simplifies the user experience and reduces the costs associated with integrating and maintaining disparate products. For example, standardizing on a single platform relieves HR administrators from the burden of inputting data into multiple systems.
Paycom has differentiated itself through innovation around workflow automation. In 2021, the company introduced Beti (Better Employee Transaction Interface), the industry’s first self-service payroll solution. Beti automates payroll by prompting employees to review and approve their pay before processing the payroll. In 2023, it introduced Gone, a feature that allows companies to automate decisions around employee time off requests.
Paycom reported much better-than-expected results for the first quarter. Revenues increased 11% to $500 million, and non-GAAP net income increased 5% to $2.59 per diluted share. Bottom line growth slowed due to investments in product development. On this point, CEO Chad Richeson noted that Paycom’s payroll software is now available in Ireland, its fourth international market after Canada, Mexico, and the UK.
Wall Street expects Paycom to grow earnings per share at 10.4% annually. At this consensus estimate, the current valuation of 17.7 times earnings looks quite reasonable. In fact, Paycom is currently trading near its lowest price-to-earnings multiple in history. I believe the company’s stock has a good chance of outperforming the market over the next three to five years.
Don’t miss out on this second chance to potentially make a profit.
Have you ever felt like you missed out on the opportunity to buy the most successful stocks? Then listen to this.
In rare cases, our team of expert analysts “Double Down” stock We recommend companies that are on the verge of collapse. If you’re worried you might have missed out on an investment opportunity, now is the best time to buy before it’s too late. The numbers speak for themselves.
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Amazon: If you had invested $1,000 when it doubled in 2010 That works out to $20,589.!*
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apple: If you had invested $1,000 when it doubled in 2008 That comes to $40,491.!*
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Netflix: If you had invested $1,000 when it doubled in 2004 That comes to $369,776.!*
We currently have “Double Down” alerts on three great companies, but we may not have another opportunity like this in the near future.
See the 3 “Double Down” stocks »
*Stock Advisor returns as of June 11, 2024
Trevor Jennewine has invested in Paycom Software and Shopify. The Motley Fool has invested in and recommends Paycom Software and Shopify. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
History Says the Stock Market Will Soar: 2 Great Growth Stocks to Buy Now for a Bull Market was originally published by The Motley Fool
