GigaCloud Technology (NASDAQ:GCT) has been a rocket ship in my portfolio, blasting past expectations and leaving a trail of envious investors in its wake. With a very healthy 180% gain in just a few months, I can’t help but wonder whether it is time to plant my flag and claim victory, or should I strap in for another potential rally with this growth stock?
Incredible growth
This B2B e-commerce dynamo, specialising in large parcel merchandise, has seen the shares catapult by an eye-watering 229% over the past year. To put that in perspective, the company hasn’t just outperformed its peers; it’s left them in the dust, with rivals in the sector stumbling backwards by an average of 10% during the same period.
From a fundamentals perspective, the case for the firm is as sturdy as the oversized furniture it helps distribute. With a debt-free balance sheet and solid profitability metrics, this company isn’t just growing — it’s thriving. In the last 12 months, it raked in $827m in revenue, with a cool $105m dropping to the bottom line. That’s a net profit margin of 12.74% — not too shabby for a company in the notoriously low-margin world of retail distribution.
But here’s where things get really interesting: analysts are projecting earnings growth of 25% per year for the next five years. In a world where many companies would sell their souls for double-digit growth, the strategy seems to be working.
What gets me really excited though is the valuation. Despite the strong performance, a discounted cash flow (DCF) calculation suggests there may still be another 71% increase in the shares before reaching fair value. Of course this isn’t a guarantee, and there may be plenty of bumps in the road, but it definitely has my attention.
Risks
However, the world of growth stocks is rarely straightforward, so let’s pump the brakes for a moment. The company’s meteoric rise means it’s no longer the hidden gem it once was. With a price-to-earnings ratio (P/E) of 11.2 times and a P/S ratio of 1.4 times, GigaCloud isn’t exactly in the bargain bin anymore.
There’s also the not-so-small matter of insider selling over the past three months. Now, insiders sell for many reasons, and it doesn’t always spell doom, but it’s certainly not the kind of signal that has investors doing cartwheels of joy.
And let’s not forget about volatility. With a weekly volatility of 8.9%, investing in this growth stock is a bit like riding a bucking bronco — thrilling when you’re on top, but with the constant risk of being thrown off.
One to watch
So, the question remains of what I should do with my current holdings. With great returns already, I could sell a portion, and lock in some of these gains while still keeping skin in the game for potential future growth. Or, I could sell the lot and find another opportunity.
However, with the valuation suggesting there could still be plenty more growth ahead, I’m keen to let this one run. I’ll be holding onto my shares, and keeping an eye out for more opportunities to buy.
This post was originally published on Motley Fool
