What happened

Rocket Lab USA (RKLB -2.55%) went public in late August, and in September the stock shot into the stratosphere. The shares gained 60.8% for the month, according to data provided by S&P Global Market Intelligence, on investor enthusiasm about this launch specialist.

So what

Rocket Lab is part of a generation of space starlets that have gone public in recent years, with Rocket Lab joining the markets on Aug. 25 via a merger with a special purpose acquisition company (SPAC). But while space tourism start-ups like Virgin Galactic Holdings have gotten a lot of the attention, Rocket Lab could end up being the better business.

A rocket launches into space.

Image source: Getty Images.

Rocket Lab is focused on the small satellite launch market, one of the largest subsectors in space, and the company is moving quickly to round out its offering. Rocket Lab has a second, larger rocket on the way and is attempting to diversify into satellite components and other equipment to be more of a one-stop shop for its customers.

The shares were pushed higher during the month in part thanks to several positive analyst initiations. Bankers are intrigued by Rocket Lab's low cost structure and first-mover advantage, calling it a potential winner in the modern space race.

The company provided a bit of rocket fuel of its own mid-month when it filed with regulators updating recent results, saying that gross profit had flipped from negative to positive, and its backlog was up 136% year over year.

Now what

Rocket Lab isn't your typical space start-up. The company has been around since 2006 and has put more than 100 satellites into orbit for both government and commercial customers.

There is a lot of hype surrounding space right now and also a lot of risk. Rocket Lab is valued by the market at $7 billion but only has $55 million in annualized sales. The company has a clear path to grow into that valuation, but investors need to be aware that what comes up does tend to come down, and Rocket Lab at this valuation is likely to be volatile.

For those who can stomach the potential turbulence, Rocket Lab looks like a potential winner. Just make sure it is kept to a small part of a well-diversified portfolio just in case there are unforeseen black holes up ahead.