Have you been paying attention to shares of GitLab Inc. (GTLB)? Shares have been on the move with the stock up 32.1% over the past month. The stock hit a new 52-week high of $64.89 in the previous session. GitLab Inc. has gained 42.4% since the start of the year compared to the 49.9% move for the Zacks Computer and Technology sector and the 64.9% return for the Zacks Internet - Software industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on December 4, 2023, GitLab Inc. reported EPS of $0.09 versus consensus estimate of $-0.01 while it beat the consensus revenue estimate by 6.23%.
For the current fiscal year, GitLab Inc. is expected to post earnings of $0.13 per share on $573.81 million in revenues. This represents a 128.26% change in EPS on a 35.23% change in revenues. For the next fiscal year, the company is expected to earn $0.34 per share on $725.17 million in revenues. This represents a year-over-year change of 168.68% and 26.38%, respectively.
Valuation Metrics
GitLab Inc. may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
GitLab Inc. has a Value Score of F. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 517.8X current fiscal year EPS estimates, which is a premium to the peer industry average of 39.9X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 17.8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, GitLab Inc. currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if GitLab Inc. passes the test. Thus, it seems as though GitLab Inc. shares could have potential in the weeks and months to come.
How Does GTLB Stack Up to the Competition?
Shares of GTLB have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Zoom Video Communications, Inc. (ZM). ZM has a Zacks Rank of # 1 (Strong Buy) and a Value Score of D, a Growth Score of B, and a Momentum Score of A.
Earnings were strong last quarter. Zoom Video Communications, Inc. beat our consensus estimate by 19.44%, and for the current fiscal year, ZM is expected to post earnings of $4.64 per share on revenue of $4.51 billion.
Shares of Zoom Video Communications, Inc. have gained 11.7% over the past month, and currently trade at a forward P/E of 14.42X and a P/CF of 32.94X.
The Internet - Software industry is in the top 11% of all the industries we have in our universe, so it looks like there are some nice tailwinds for GTLB and ZM, even beyond their own solid fundamental situation.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
