Grid Dynamics: An Obscure U.S. Small Cap With Potential

Grid Dynamics

So far this year, blue chip stocks have been responsible for most of the gains in the major indices. But some small caps have quietly been posting great results as well. Today I would like to introduce you to one of these small caps: an obscure U.S. digital services firm called Grid Dynamics (NASDAQ:GDYN).

Company Snapshot

Grid Dynamics is an e-commerce service provider from California that went public only last March. It offers numerous services for the e-commerce sector, including help with product portfolio optimization, price consulting and marketing services.

Other areas of activity include competitor analysis, cloud-based IT infrastructure optimization and data security improvement. Last year, the company topped $100 million in revenue for the first time.

A Long List of Multinational Customers

The company is still quite small; it has a market cap of under $2 billion at the time of writing. Yet it has already won numerous multinational corporations as customers. Among others, technology giants such as Apple, Google, PayPal, VISA and Tesla rely on Grid Dynamics’ services to support their e-commerce offerings.

At the end of July, Google extended a collaboration with Grid Dynamics to power its Google Cloud Retail Search service, which allows e-commerce retailers to create customized, Google-quality search engines to help consumers find products on their websites.

Grid Dynamics also works with some big low-tech brands in the consumer staples and consumer discretionary sectors, including Pepsico, Home Depot, LVMH, Macys, Levi’s and Lowe’s, among others.

Second Quarter Sales Double

Second quarter results reported in August were excellent: Q2 revenue jumped 113% year-over-year to $47.7 million (with about $9.3 million coming from the recent acquisition of two software development firms, Daxx Web Industries and Tacit Knowledge).

This far exceeded the average analyst forecast of $41.9 million. At the same time, earnings per share increased 900% from one to ten cents year-over-year; analysts had expected only six cents.

Speculative Value

With estimated annual sales of $190 million in the current fiscal year, Grid Dynamics is still a fairly small company. The risk is always higher with such small caps than with more established corporations. But while Grid Dynamics may be small and scrappy, it offers immense profit potential. The new order from Google and the strong quarterly report have recently given the stock a boost. This could well be the start of a long-term upward trend.

At a market cap of $1.86 billion, the company is currently valued at just over 10 times sales, which seems quite cheap considering its growth potential. For speculative investors who are looking for a small cap portfolio addition, Grid Dynamics shares are definitely worth a closer look.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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