This report presents a detailed analysis of Shopify’s (SHOP) financial performance over the 7-year period from 2016 to 2023. It includes metrics related to earnings per share, net profits, revenue, shareholders’ equity, and long-term debt, along with the calculated compound annual growth rates (CAGR) for each.
1. Earnings per Share (EPS)
- Initial EPS (2016): $-0.04
- Current EPS (2023): $0.10
- Annual EPS Growth Rate (CAGR): 0.00%
- Projected EPS in 10 years: $0.10
- Estimated Stock Price in 10 years: $3.00
- Annual Stock Price Growth Rate (CAGR): -28.17%
Insights:
Although the EPS has turned positive, the growth rate has been stagnant over the past 7 years, leading to a projected EPS of $0.10 in the next decade. The stock price projection shows a significant decline, suggesting challenges in translating operational growth into shareholder value.
2. Net Profits
- Initial Net Profits (2016): -$35.00 million
- Current Net Profits (2023): $132.00 million
- Annual Net Profits Growth Rate (CAGR): 1908.81%
Insights:
The company has achieved a remarkable turnaround, moving from a negative profit scenario to generating $132 million in net profits. The exceptional CAGR of 1908.81% indicates strong profitability growth, reflecting operational improvements and market capture.
3. Revenue
- Initial Revenue (2016): $390.00 million
- Current Revenue (2023): $7.00 billion
- Annual Revenue Growth Rate (CAGR): 51.06%
Insights:
Revenue has surged from $390 million to $7 billion, highlighting a robust annual growth rate of 51.06%. This consistent revenue expansion showcases Shopify’s success in scaling its business and expanding its customer base over the years.
4. Shareholders’ Equity
- Initial Equity (2016): $400.00 million
- Current Equity (2023): $9.00 billion
- Annual Equity Growth Rate (CAGR): 56.02%
Insights:
Shareholders’ equity has witnessed substantial growth, achieving a CAGR of 56.02%. This reflects Shopify’s strong asset accumulation and capital management, contributing to its overall financial stability.
5. Long-Term Debt
- Initial Long-Term Debt (2016): $750.00 million
- Current Long-Term Debt (2023): $900.00 million
- Annual Long-Term Debt Growth Rate (CAGR): 2.64%
- Years to pay off long-term debt using net profit: 6.82 years
Insights:
The long-term debt has only slightly increased over the 7-year period, with a moderate annual growth rate of 2.64%. With the current level of net profits, Shopify could potentially pay off its long-term debt within 6.82 years, indicating a manageable debt position.
Conclusion
Shopify has demonstrated impressive growth across key financial metrics, particularly in net profits, revenue, and shareholders’ equity. However, the EPS and stock price projections indicate potential challenges in sustaining shareholder returns in the long term. Despite a slight increase in long-term debt, the company remains in a strong position to manage its financial obligations, benefiting from a solid revenue base and profit generation.
Recommendations:
- Focus on improving EPS to drive shareholder value.
- Continue scaling revenue while managing costs to maintain profitability.
- Monitor debt levels to ensure financial flexibility and growth sustainability.