Bill Holdings (NYSE: BILL) has been on a rollercoaster ride in the stock market. The company’s suite of unique software tools for small and mid-size businesses initially propelled its stock to an all-time high, but in recent times, the stock has plummeted by a staggering 81% from its peak. However, this apparent downfall presents itself as a potential opportunity for investors to seize. Let’s delve into the reasons why Bill.com is increasingly essential to small businesses and why the current dip in the stock might just be the perfect entry point for shrewd investors.

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The Essentiality of Bill.com to Small Businesses

Small business owners are modern Renaissance people, juggling a multitude of responsibilities. Amidst this chaos, Bill.com swoops in as a savior, offering a trio of software tools to automate accounts payable, accounts receivable, and internal expense management. Gone are the days of endless paperwork and the nightmare of tracking paid invoices; Bill.com’s digital inbox consolidates incoming invoices from various sources and formats, simplifying the payment process with just a click while automatically updating the business’s bookkeeping software. The company’s ownership of Invoice2go and Divvy further solidifies its position as a game-changer for seamless business operations.

Bill.com has integrated itself into the operations of an impressive 473,500 small and mid-size businesses, forging partnerships with over 7,000 accounting firms that recommend its services. This network not only aids in customer acquisition but also serves as a testament to the value it brings to the table.

Revenue Growth and Cost Management

In the recent fiscal 2024 second quarter, Bill.com clocked in a record-high $318.5 million in revenue, marking a 22% year-over-year increase. While undeniably impressive, it signifies a significant deceleration from the rapid growth rates that had become the norm for the company. However, this slowdown is a deliberate strategy crafted through prudent fiscal discipline.

Cost management has been central to Bill.com’s approach, evident in a 28% decrease in marketing expenditures and flat overall operating expenses. This allowed a larger share of the increased revenue to flow to the bottom line, leading to a considerable reduction in GAAP net loss. On a non-GAAP basis, the company recorded substantial profits, highlighting its ability to navigate a shift in focus from growth-at-all-costs to a more balanced and sustainable approach.

The Case for Investing in Bill.com

Despite the apparent deceleration in growth, Bill.com stands at the precipice of an enormous addressable market, with its current customer base representing just a fraction of the potential clientele it aims to serve. Its revenue model, primarily reliant on transaction fees, is positioned to capitalize on the vast global market for small and mid-size business payments. The recent dip in the stock price presents an enticing entry point for long-term investors, particularly with the anticipation of a resurgence in revenue growth once the company achieves consistent GAAP profitability.

Bill.com has barely scratched the surface of its potential, having processed a mere fraction of the annual payments made by small and mid-size businesses globally. Its long-term prospects, coupled with the current discount from its all-time high, make it an intriguing investment opportunity for those willing to weather short-term fluctuations for substantial potential returns.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bill Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.