Last week, Lightspeed Commerce (TSX: LSPD) posted impressive second-quarter earnings that ended on September 30. Its topline grew by 20%, while its adjusted net income increased by 211%. Operating and free cash flows also improved during the quarter. After posting a solid second-quarter performance, the company's management raised its 2024 guidance, improving investors' confidence.

Besides, the company postponed its November 20 Capital Markets Day, citing the ongoing strategic review. However, the postponement has raised speculation that the company is progressing toward a sale. Amid all these developments, Lightspeed has witnessed healthy buying over the last few days, with its stock price rising 12.5% since reporting its second-quarter earnings.

Despite the recent increase, the company trades at an 85% discount compared to its 2021 highs. So, let's assess its second-quarter performance and growth prospects to determine buying opportunities in the stock.

Lightspeed's second-quarter performance

Lightspeed posted revenue of $277.2 million in the second quarter, representing a 20% increase from the previous year. The strong growth of 33% in transaction-based revenue and a 6% increase in subscription-based revenue boosted its top line. During the quarter, the company had several customer wins, thus expanding its customer base. Besides, the company's average revenue per user (ARPU) rose 24% to $527 amid its unified POS (point-of-sales) and Payment offering and increased transition towards higher GTV (gross transaction value) customer locations.

Gross profits rose 19% year-over-year to $114.3 million. However, gross margins fell 1% to 41% amid increased adoption of Lightspeed Payments. Supported by topline growth, net losses fell from $42.5 million in the previous year's quarter to $29.7 million. Besides, it generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $14 million, a substantial improvement compared to $0.2 million.

Moreover, the company generated operating cash flows of $11.3 million compared to $24.8 million cash used in the previous year's quarter. Its free cash flows also improved to $1.6 million from $17.2 million cash used. It ended the quarter with cash and cash equivalents of $659 million. So, it is well-equipped to fund its growth initiatives.

Lightspeed's growth prospects

The growth in e-commerce has encouraged many small- and medium-scale businesses to adopt an omnichannel selling model, thus expanding Lightspeed's addressable market. Besides, the company continues to develop and launch new innovative products to meet the growing needs of its customers, thus expanding its customer base and boosting ARPU. The company's unified POS and Payment offering has increased the adoption of its Payments platform, thus increasing its GPV (gross payment volume). So, its growth prospects look healthy.

Along with these growth initiatives, Lightspeed has adopted several cost-cutting initiatives that could improve its profitability. After posting its second-quarter performance, the company's management has raised its fiscal 2025 guidance. The new guidance represents 20% revenue growth, while its adjusted EBITDA could exceed $50 million. The adjusted EBITDA guidance represents a 104% increase from the previous fiscal.

Investors' takeaway

Although Lightspeed has witnessed healthy buying over the last few days, it trades at a substantial discount compared to its 2021 highs. Besides, its valuation looks attractive, with the company currently trading 2.3 times analysts' projected sales for the next four quarters, while its price-to-book multiple stands at 1.2. Considering its healthy growth prospects, improved profitability, and cheaper valuation, I believe Lightspeed could deliver oversized returns over the next three years.