Most investors would love a high-growth stock that rockets in months for their portfolio.
Had they bought into GetSwift Ltd [ASX:GSW] this year, they’d have found one. The stock is up more than 1,000%. Have a look:
Source: Google Finance
GetSwift is a logistical software company.
While that may not excite you, for companies like Amazon, GetSwift is extremely exciting.
When you send out hundreds of millions of products each year, any small logistical improvement matters.
As it happens, GetSwift’s service was an opportunity too good for Amazon to pass up.
On 1 December, GetSwift announced that they had signed a global agreement with Amazon. You can see when investors found out about the deal on the chart, indicated by the sharp spike. The share price went from $1.96 to $3.60 overnight.
The company is now worth $321 million.
But is it still cheap? Or have you missed the boat?
What Now for GetSwift?
A global agreement with Amazon is a huge deal. However, there’s a whole lot we don’t know about the agreement.
For one, we don’t know the amount Amazon will pay for GetSwift’s services. We also don’t know how long the agreement is set to last.
There’s a lot of uncertainty surrounding the deal. Right now all we know is that GetSwift has a global deal with Amazon.
If we take a look at GetSwift’s financials, they’re generating $336 million in sales. But they’re also making a loss of $1.9 million.
Nonetheless, it’s expected that the Amazon deal will improve sales. But by how much?
For GetSwift to trade at a reasonable multiple of, say, 15–20x earnings, the company would need to generate a net income of $16–$21 million.
The company could grow profits to such a sum. However, as profitability grows, it’s likely that investors will keep buying the stock.
In my view, there’s a bit too much uncertainty surrounding GetSwift. Sales could grow and the company could start to generate a profit — but how much, and when?
It’s up in the air for now.
Junior Analyst, Money Morning