Gigacloud Technology Co., Ltd. (GCT) has recently been on the list of Zacks.com’s Most Searched Stocks, so it may be wise to consider some key factors that could affect the stock’s performance in the near future.
Shares of this company have returned -1.8% over the past month versus a +4.3% change for the Zacks S&P 500 composite index. The Zacks Technology Services industry, which GigaCloud Technology Inc. belongs to, has gained 4.8% in that period. The big question here is, where is this stock headed in the near term?
Media announcements or rumors of significant changes in a company’s business outlook will usually make the stock “trend” and cause immediate price movements, but there are always some fundamental facts that ultimately drive the buy-and-hold decision.
Earnings forecast revision
At Zacks, we prioritize evaluating the changes in a company’s earnings estimates over other factors because we believe the fair value of a stock is determined by the present value of its future earnings stream.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings forecasts in light of the latest business trends. When a company’s earnings forecast goes up, the fair value of its stock also goes up. And if a stock’s fair value is higher than its current market price, investors are more inclined to buy the stock, resulting in an increase in its share price. For this reason, empirical research shows a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
For the current quarter, GigaCloud Technology Inc. is projected to post earnings of $0.71 per share, representing a +57.8% change from the year-ago period. The Zacks Consensus Estimate has remained unchanged within the past 30 days.
The consensus earnings estimate for the current fiscal year is $3.25, indicating a change of +41.3% year-over-year. This estimate has not changed in the past 30 days.
Looking at the next fiscal year, the consensus earnings estimate is $4.02, which represents a +23.7% change from what GigaCloud Technology Inc. was expected to report a year ago. Over the past month, estimates have remained unchanged.
The Zacks Rank, our proprietary stock rating tool with a strong outside-audited track record, effectively harnesses the power of earnings estimate revisions and provides a more certainty view into near-term stock price direction. The magnitude of the recent change in consensus estimates, along with three other factors related to earnings estimates, have earned GigaCloud Technology Inc. a Zacks Rank #1 (Strong Buy).
The chart below shows the evolution of the company’s consensus EPS estimates over the next 12 months.
12 Month EPS
Revenue Growth Forecast
Revenue growth is arguably the best indicator of a company’s financial health, but if a company can’t grow its revenue, then nothing happens. After all, it’s nearly impossible for a company to grow its revenue over the long term without growing its revenue. Therefore, it’s important to know a company’s revenue growth potential.
For GigaCloud Technology Inc., the consensus revenue estimate for the current quarter is $272.5 million, indicating a change of +78% year-over-year. Estimates for the current and next fiscal years are $1.15 billion and $1.33 billion, indicating changes of +63.2% and +16.2%, respectively.
Last reported results and surprise history
GigaCloud Technology Inc. reported revenue of $251.08 million for the most recent quarter, up 96.5% from the same period last year. EPS for the same period was $0.84, up from $0.39 in the same period last year.
Compared to the Zacks Consensus Estimate of $235 million, reported revenues represented a surprise of +6.84%. EPS surprise was +64.71%.
The company has beaten consensus EPS estimates in each of the last four quarters, and revenue also beat consensus estimates in each quarter during that period.
evaluation
No investment decision can be efficient without taking into account stock valuation. To predict the future price movement of a stock, it is important to determine whether the current price properly reflects the intrinsic value of the underlying business and the company’s growth prospects.
Comparing the current value of a company’s valuation multiples such as Price to Earnings (P/E), Price to Sales (P/S), Price to Cash Flow (P/CF) with its historical values ​​helps in identifying whether the stock is fairly valued, overvalued or undervalued. Also, comparing a company with its peers based on these parameters gives a good idea of ​​how reasonably priced its stock is.
The Zacks Value Style Score, a part of the Zacks Style Scores system, evaluates both traditional and non-traditional metrics, categorizes stocks into five groupings from A to F (A is better than B, B is better than C, etc.) to help identify whether stocks are overvalued, fairly valued or temporarily undervalued.
GigaCloud Technology Inc. is rated an A in this regard, indicating that it is trading at a discount relative to its peers. To see the values ​​of the valuation metrics that drove this rating, click here.
Conclusion
The facts discussed here, and many other information on Zacks.com, may help you decide whether it’s worth paying attention to the market buzz surrounding GigaCloud Technology Inc. However, the company’s Zacks Rank #1 suggests that the company is likely to outperform the overall market in the near term.
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GigaCloud Technology Inc. (GCT) : Free Stock Analysis Report
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