Can you believe it? Uber Technologies (UBER -0.38%) finally reported a positive operating profit based on generally accepted accounting principles. In the second quarter (ended June 30), operating income came in at $326 million, a reversal from the massive loss in the year-ago period and a surprise for Wall Street analysts. 

This good news wasn't enough to push shares higher, though, as Uber's sales missed expectations. Regardless, the stock is up 86% in 2023 (as of Aug. 3), handily beating the Nasdaq Composite Index. 

Should investors buy, sell, or hold this leading transportation-as-a-service stock right now on the heels of its latest financial update? Let's take a closer look. 

Profitable growth 

Revenue of $9.2 billion in the second quarter missed expectations, but it still represented year-over-year growth of 14%, which is healthy considering the uncertain economy. Gross bookings were up 16% to $33.6 billion. 

The platform appears to be on strong footing right now. The company said there were 6 million drivers and couriers, who were paid a total of $15.1 billion during the quarter. With 137 million monthly active users, it's probably not surprising that Uber handled an incredible 2.3 billion trips in the three months, up 22%. This demonstrates that it's growing in all aspects. 

The mobility division (rides) registered gross bookings of $16.7 billion, while the delivery segment posted gross bookings of $15.6 billion. Besides the key segments of rides and food delivery, Uber is making inroads into the convenience category, and groceries in particular. "These are large basket sizes, appointment viewing, coming back every week," CEO Dara Khosrowshahi said on the second-quarter earnings call. 

The company's offerings other than just rides can drive user stickiness by fulfilling the various needs a consumer might have. This reduces the need to leave the app to use competing platforms. And higher engagement can translate to greater ad revenue, already a focus for management. 

Uber was able to generate over $1.1 billion of free cash flow (FCF) in the period. Because capital requirements are tiny (just $50 million in the last quarter), this is a capital-light operation.

But investors shouldn't forget that Uber still has to direct resources to research and development, in addition to sizable marketing initiatives. It's encouraging, however, that sales and marketing expenses in the second quarter were the same as they were a year ago, and the company still reported meaningful growth. 

What should investors do? 

Despite the recent sell-off after the latest quarterly update, Uber's stock has been on an absolute tear in 2023, so it's not hard to understand why some shareholders, at least those lucky enough to be sitting on gains, might be inclined to take profits. If they don't believe in the long-term prospects, or they think the valuation is rosy, then perhaps they could redirect that capital to a lucrative investment opportunity elsewhere. 

But shares currently trade at a trailing price-to-sales (P/S) ratio of 2.7. That valuation is still way below Uber's historical average P/S of 4.5. That discount is enticing for investors who have been sitting on the sidelines. 

The company is now profitable, and its CEO thinks the business will generate positive net income every quarter from here on out. Growth is still well into the double digits in percentage terms.  

With its powerful network effects, it is not only well protected from a smaller rival like Lyft because it can better match drivers and riders (as well as restaurants and other businesses), but it could also see its bottom line soar in the years ahead. That's if Uber can keep scaling up in a profitable manner, which is common for businesses with network effects. 

This makes a solid argument for buying the stock, and for those who are shareholders to keep holding.