What happened
Shares of Grid Dynamics Holdings (GDYN 2.35%) soared on Friday after the company reported quarterly results after the closing bell on Thursday. The stock was up as much as 37.7% on the day, and as of 2:04 p.m. EDT, is up 26.1%.
So what
After the close on Thursday, Grid Dynamics released its financial results for the third quarter, which covered the three months ending in September. Revenue was $57.9 million in the period, up 120% year over year. Adjusted earnings per share (EPS) was $0.11 in the period. Both numbers were better than what analysts had expected heading into the report. The company also got an upgrade from an analyst at Needham & Company, which raised its price target to $45 a share and labeled the stock a buy. Currently, the stock trades at around $37 a share.
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Grid Dynamics provides consulting services to help large companies digitally transform their businesses. The digital transformation was accelerated during the COVID-19 pandemic, so more and more companies seem to be going to Grid Dynamics to help their businesses improve for the 21st century. Specifically, Grid Dynamics is seeing huge demand from retail clients. In Q3, retail revenue grew 198.5% year over year and now makes up 31.5% of Grid Dynamic's overall sales.
For the full year in 2021, the company is now guiding for $202 million to $203 million in revenue.
Now what
Grid Dynamics has a market cap of $2.28 billion after the recent jump in the share price. Based on revenue guidance for the full year, the stock trades at a price-to-sales ratio (P/S) of 11.2. This is expensive for a consulting business with inconsistent profits, but if Grid Dynamics can continue growing its revenue at a high rate, the stock will likely do well for shareholders from here.
