SPSCNASDAQThe short version
SPS Commerce, Inc.
SPS Commerce runs a cloud EDI network connecting retailers and suppliers, with 96% recurring revenue and 100 straight quarters of growth. Its shares have fallen roughly two-thirds from a 2024 peak on a growth-rate reset.
From a $215 peak on 31 July 2024, the stock fell to $50 by May 2026 before recovering to $73 — a two-thirds drawdown while revenue kept compounding.
Mkt cap $2.8BP/E FY27E 13.8×
$73.39
Share price
$2.79B
Market cap
0.17%
Adj. FCF yield vs 8.5% bar
100
Consecutive quarters of growth
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Snapshot
SPS Commerce, Inc. in numbers
Price
$73.39as of 2026-07-31
Mkt cap
$2.8B
12m perf
−32.6%
3m ADV
$36.9M
| Year to Dec (USD) | 2023 | 2024 | 2025 | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|---|
| Sales | 536.9M | 637.8M | 751.5M | 791.2M | 841.2M | 903.8M |
| EBITDA | 95.9M | 107.6M | 139.4M | 266.6M | 293.9M | 329.1M |
| EBIT | 77.2M | 88.9M | 118.3M | 241.8M | 268.4M | 305.7M |
| EBIT margin | 14.4% | 13.9% | 15.7% | 30.6% | 31.9% | 33.8% |
| EPS | 1.76 | 2.04 | 2.46 | 4.91 | 5.31 | 6.00 |
| P/E | 41.7× | 36.0× | 29.8× | 14.9× | 13.8× | 12.2× |
| FCF yield | 4.0% | 4.9% | 5.5% | 6.5% | 7.2% | 7.9% |
Consensus: S&P Capital IQ (CapIQ) · as of 2026-08-02Derived from run data; ratios use the latest price.
IThe business
The business
A retail EDI network that reads like a utility — 96% recurring, 100 straight quarters of growth
$751M
FY2025 revenue+17.8% YoY
96%
Recurring revenue
~54,600
Recurring customers
~$14,300
Average annual spend
- Connect once, sell to thousands. Suppliers plug into SPS to trade purchase orders and invoices with any retailer already on the network; SPS maintains each retailer's compliance rules and onboards the partners.
- A network that compounds. Management says its value 'increases exponentially with scale' — a new customer usually finds its partners already connected, and no single customer is worth even 1% of revenue.
- A long runway, self-measured. SPS pegs its market at $11.1B across ~275,000 potential customers, putting it near 7% of the dollars — a figure sourced from its own consultant.
IIIThe story now
The fit
Outside the framework's universe (U2 not met); contested: P2
The pillar ledger
| Test | Result |
|---|---|
| Scale (U2) | $2.79B vs $10B bar — miss |
| Year-10 durability (P1) | Met · p 0.79 |
| Yield vs 8.5% bar (P3c) | ~0.17% · not met |
| Diagnosis (P5) | Temporary · p 0.58 |
| FCF consistency (P2) | Contested |
| Confidence | High |
- A scale test, not a quality test. The framework only screens companies above a $10B market cap. At $2.79B, SPS sits about 72% below that line, so the screen stops before any dislocation setup is underwritten.
- Even the peak fell short. The July-2024 high of $215 implied only ~$8.2B on today's share count — no price in this window clears the bar. Two model families agreed unanimously.
- The business still passes the durability gate. Year-10 revenue durability (P1) is met with high conviction; the miss is size, not staying power.
The dislocation
A two-thirds fall that landed on earnings days, not a drift
- A dated trigger. On the Q2 2025 call management reset its multi-year growth algorithm from '15%+' to high single digits; the stock fell 22% that session — one of four earnings-day legs in a 651-day, 77% decline.
- Emotion-driven selling. Volume ran ~6.96x its trailing median at the peak of the fall, well past the 2x line the framework treats as capitulation.
- The counter, same breath. The 22% drop landed on a 10% EPS beat and the volume clustered on scheduled earnings days — as consistent with an orderly re-rating as a panic.
Inverted signature
It fell on beats — six straight quarters of double-digit EPS surprises
Normalized EPS surprise vs consensus
- The numerator never fell. Every quarter through mid-2026 beat consensus EPS by 10–18%; consensus FCF is modeled up from $162M to $221M and normalized EPS from $4.13 to $6.00 by 2028.
- What got repriced is growth. A stock that falls on beats is not being punished for the quarter it delivered; forward revenue growth reset to ~5.3% from the 17.8% just posted.
The diagnosis
Growth reset, not earnings collapse, and the diagnosis splits near even
0.58
Diagnosis: p(temporary)
~750
Organic net customer adds, FY2025
$23.5M
Loss on 3P divestiture
- An inverted impairment. The adversarial trial put the odds the damage is temporary at 0.58 — near even, spread 0.13. Earnings never fell; the reset was to the growth rate and the multiple.
- The count that broke. FY2025's 20% customer jump was almost entirely the acquired Carbon6 cohort; organic net adds were ~750, and the third-party unit was later sold at a $23.5M loss.
- What decides it. Whether recurring customers and ARPU grow off the ~54,600 base without a large deal, or whether the deceleration proves structural.
Durability
Ten straight positive cash-flow years — until you subtract the acquisitions
Free cash flow, FY2016–FY2025
Reported FCF is monotone; on the adjusted basis (less stock comp and average acquisitions) recent years fall to ≈ −$2.3M (FY2024) and +$4.7M (FY2025).
- The gate passes. Revenue rose every year from $193M to $752M — a ~16% CAGR over 100 quarters — so year-10 durability (P1) clears with high conviction.
- The consistency test splits. On the framework's adjusted definition — FCF minus stock comp minus average acquisitions — recent-year cash falls near zero, because acquisition outlays ran ~$143–148M. Jurors split cannot-determine vs not-met (P2 contested).
- Raw conversion is clean. Operating cash ran 1.9x net income with no receivables build; the adjustment, not the business, is what turns the series thin.
Self-help
Record buybacks into the fall, yet the share count still drifts up
Share repurchases, cash ($M)
- The engine is running. Buybacks stepped up from $0 in FY2023 to $37.6M and then $114.3M, against a $300M authorization; in Q1 FY2026 SPS deployed ~100% of free cash flow to repurchase $47.1M.
- But the count hasn't inflected. Diluted shares rose from 36.3M (FY2020) to 38.0M (FY2025) — a +0.9% CAGR — because repurchases only roughly matched stock comp. On the hard-fail path, the repurchase pillar (P4b) is not met.
- Fortress behind it. $151M cash, no funded debt, no dividend — the balance sheet outlasts the problem trivially (P4a met).
IVThe price
What you pay
A 0.17% adjusted FCF yield against an 8.5% bar
FCF yield vs the fortress bar
Adjusted (framework)
0.2%
Unadjusted FCF
5.5%
Consensus FCF
5.8%
- Even the charitable reads miss. A fortress balance sheet sets the bar at 8.5%. Adjusted FCF yield is ~0.17% — about 833bps short — because ~$94M/yr average acquisitions and $54M of stock comp consume nearly all of $152M reported FCF.
- No read clears it. Unadjusted FCF (5.46%) and consensus FCF (5.80%) both sit well below 8.5% — the setup fails on its own terms (P3c not met).
The forward path
Consensus yield rises toward the bar, but never reaches it within three years
Consensus FCF yield vs 8.5% bar
- Close, not there. Consensus forward FCF yield rises 5.80% → 6.55% → 7.20% → 7.93% through FY2028 and never reaches 8.5% inside the three-year window. Probability it clears: ~0.105.
- And these overstate it. The consensus figures are unadjusted — they don't subtract stock comp or acquisitions — so the framework's adjusted forward yield is lower still.
The re-rating
The multiple that priced high-teens growth is gone, and the target test can't be drawn
14.9x
Forward normalized P/E
$72.73
Mean analyst target
~5.3%
Consensus fwd revenue growthfrom 17.8%
- Priced as the new normal. At $73 SPS trades ~14.9x forward EPS and ~6.5% forward FCF yield; the sell-side has converged targets to a $72.73 mean, at or below spot.
- No re-rating arithmetic. With adjusted FCF running near zero after stock comp and acquisitions, there is no stable normalized figure to capitalize at the 8.5% bar — the framework records the re-rating math as unavailable.
What to watch
Durable and cash-generative, but too small for this framework — and now priced near where the sell-side sees it.
- 01revenue declines for a third consecutive year
- 02Core revenue excluding the divested 3P business falls below roughly 5% for two consecutive quarters
- 03FY2027 non-GAAP EPS consensus is cut below ~$4.80
- 04capital allocation pivots to debt paydown over repurchases
This distills a fixed fit test built tab by tab; it is one framework's screen, not investment advice.
Compiled from the full report · 2026-08-02 · For information, not investment advice.