As we head into 2025, growth investors seeking the next big winner might want to take a fresh look at Shopify (TSX:SHOP). The $200 billion Canadian e-commerce giant has not only maintained its impressive revenue growth trajectory in recent years but is also demonstrating something that growth stock investors love to see: expanding operating profitability alongside revenue gains.

Despite SHOP stock already delivering a remarkable 49% return in 2024, there's compelling evidence suggesting this growth story still has more chapters to write. While shares remain 28% below their 2021 peak, the company's operational excellence and market dominance make it an intriguing prospect for long-term investors as it attempts to reclaim stock-split-adjusted all-time highs.

Shopify: A growth machine still humming

Shopify continues to prove the skeptics wrong by maintaining powerful growth despite its already massive $200 billion market capitalization. The company's third-quarter 2024 results tell the story: revenue surged 26% year-over-year, while operating income skyrocketed 130% on a constant currency basis. This isn't just growth – it's profitable growth, the holy grail for technology investors.

The 2024 holiday season further cements Shopify's dominance. During the Black Friday-Cyber Monday weekend, merchants on the platform generated a record-breaking US$11.5 billion in sales, marking a robust 24% increase from the previous year. Even more impressive was the 58% year-over-year jump in transactions through Shop Pay, signaling strong adoption of the company's higher-margin payment solutions.

Profitability: The game changer

What makes Shopify particularly attractive now is its improving profitability profile. The company's operating model has found the perfect balance. Since late 2023, additional revenue is increasingly flowing directly to the bottom line in an alluring demonstration of operating leverage (where operating costs remain relatively static while revenue continues to grow).

SHOP Revenue (TTM) data by YCharts

The company has achieved six consecutive quarters of more than 25% revenue growth (excluding logistics), while simultaneously expanding its free cash flow margins each quarter in 2024. The third quarter saw free cash flow reach $421 million, a stunning 53% increase from 2023's $276 million.

This growing free cash flow gives Shopify significant strategic flexibility, whether for acquisitions, new technology investments, or potentially following tech giants like Meta Platforms and CGI Inc. in initiating a dividend program – though that's likely still years away.

Looking ahead to 2025

Management's outlook remains bullish, with fourth-quarter 2024 revenue expected to grow in the mid-to-high twenties percentage range. The company continues to invest in artificial intelligence while maintaining operational discipline, targeting operating expenses at 32–33% of revenue.

Is SHOP stock a buy? The investment case

While SHOP stock's trailing price-to-earnings (P/E) ratio of 101 might make value investors nervous, growth investors should consider several factors:

• Consistent double-digit revenue growth
• Expanding operating margins
• Strong free cash flow generation
• Dominant market position in global e-commerce
• Continued innovation in payment solutions and platform capabilities

For investors with a long-term horizon, Shopify's combination of scale, growth, and improving profitability makes it a compelling investment case. While the stock may not replicate its 2024 gains immediately, the company's fundamental strength and market leadership position it well for continued success.

Investor takeaway

As e-commerce continues its global expansion and more entrepreneurs seek digital solutions, Shopify's platform is becoming increasingly valuable. For growth investors willing to weather some volatility, SHOP stock offers exposure to one of technology's most impressive growth stories – one that's increasingly backed by solid profitability metrics.