Why would a company such as Docebo be priced so expensively in terms of P/E and price to sales and what about the major competitors in the LMS domain, do they also trade so expensively?
DCBO trades so expensively since it is a recently profitable company and it's valuation reflects the high growth potential. One of DCBO's peers in the LMS space is DTOL, which is expensive at 26.4x forward earnings and 2.1x forward sales, albeit much cheaper relative to DCBO. We do think however, that DCBO's valuation is justified to an extent as DCBO’s ARR growth of 26% vastly outpaces DTOL’s ARR growth rate of 13%. In our recent report on DCBO we mentioned that we expect its forward earnings multiple to contract substantially in the coming years as it grows its profit margins. Since the time of writing, DCBO's stock is up nearly 20%, but the forward earnings multiple has come down to 55.6x from 68.6x. So while DCBO is expensive, this is justifed by the high growth it is exhibiting especially against its close LMS peer DTOL. DCBO also heavily leverages AI in its solution offering so it is able to capitalize on the growth in this space as well.