SPSC

SPS Commerce is a textbook quality compounder. Revenue has climbed every year from $385M (FY2021) to $752M (FY2025), a five-year stretch of ~17-18% annual growth, and net income nearly doubled over the same span ($44.6M to $93.3M). The model is structurally attractive: a subscription-based supply-chain network the MD&A describes as 'connect once and immediately transact with thousands of trading partners,' which produces 69.2% gross margins and recurring revenue across Fulfillment, Analytics, Assortment and Relationship Management. Crucially, profitability is scaling faster than the top line — FY2025 operating income rose +33.1% versus +17.8% revenue, lifting operating margin to 15.7% and signaling real operating leverage as the network matures.

The balance sheet is pristine: total liabilities of just $196M against $974M of equity (0.20x liabilities/equity), retained earnings up 27.8%, and operating cash flow of $179M against only $26.5M of capex — roughly $150M of free cash flow, a ~7% FCF yield on the $2.16B market cap. Management is returning that cash aggressively, spending $114M on buybacks (up 204%), which explains the 37% drawdown in cash and the modest 1% reduction in share count. The headline 9.6% ROE understates business quality; it is depressed by an over-capitalized, nearly debt-free balance sheet rather than weak economics.