Shopify (SHOP)
Software / Comercio electrónico
Shopify is the most widely used commerce infrastructure for small and medium-sized businesses, with revenue growing above 30% annually and expanding margins, but Overvalued because the current price capitalizes a continuation of that pace far beyond what a reasonable exit multiple for enterprise software can sustain over five years.
- Price
- $154.21
- Intrinsic value (5y, base)
- $106
- Total annual return (5y)
- -7.1%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- FY2025 GMV of $378,400 million, +29% year over year, with Shopify Payments processing 65.6% of that volume
- TTM revenue of $13,269 million, growing 32.5% year over year, with operating margin expanding to 13.9%
- Newly authorized share buyback ($2,000 million, February 2026), with $1,420 million already executed in the second quarter
- Stock-based compensation equals 20.5% of free cash flow, so the valuation is done on EV/NOPAT, which expenses it
Intrinsic value — two valuation methods
By both methods, the value today (DCF $72 · Multiples $85) is below the market price ($154).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $154 trades ~81.3% above its value discounted to today (~$85); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$53.
Thesis
The business
Shopify is a growing-quality commerce platform, with TTM revenue of $13,269 million (+32.5% year over year) and an expanding operating margin (13.9% TTM, up from operating losses in FY2022-2023). Return on invested capital of 19.5% comfortably clears the 10% bar, supported by a very capital-light business (TTM capex of just $25 million). The main methodological adjustment is expensing stock-based compensation (20.5% of free cash flow), so the valuation relies on EV/NOPAT instead of reported cash flow.
The valuation
The multiples-based valuation method anchors the verdict: year-5 projected NOPAT times an exit multiple within the enterprise software band (20-30x), which gives a value of $106 per share at five years. Today the stock trades at 130× EV/NOPAT (TTM) — well above the terminal range — and that multiple compresses to 36× even with the projected growth, because the current NOPAT base is still small relative to the market value.
The margin of safety
No margin of safety: the price already discounts a demanding scenario. The expected return at market price is -7% annually, the result of today's price already capitalizing a continuation of growth and margin expansion greater than a disciplined exit multiple (within the archetype's band) can sustain over five years. The verdict is Overvalued.
What to watch
The central disconfirmer is the pace of operating margin expansion: if Shopify sustains a more aggressive operating leverage trajectory than projected — for example, if Merchant Solutions keeps gaining weight in the mix without compressing gross margin —, year-5 NOPAT could exceed the base case and narrow the gap with the current price. Also watch Shopify Payments penetration (65.6% and rising) as a leading indicator of revenue quality.
Educational / informational. Does not constitute investment advice.