by Leslie N. Masonson, MBA
GigaCloud Technology, Inc. (Nasdaq:GCT), was incorporated in 2006 in Walnut Creek, California where it is currently headquartered. It has $584 million in annual sales and a market capitalization of $440 million with 764 full-time employees. Previously, it was known as Oriental Standard Human Resources Holdings Limited with a name change in February 2021. Year-to-date the stock price has popped 134.3%, quite an impressive run.
The company provides global end-to-end B2B ecommerce applications for large parcel merchandise. Its focus is to connect manufacturers from Asia in the United States, Asia, and European resellers to execute cross-border transactions for furniture, home appliance, fitness equipment, and other categories. On December 8th the company was the winner in the “Best Logistics Technology Company,” and “Best Ecommerce Technology” in Furniture Today’s 2023 Reader Rankings.
GCT Inc. is probably not a well-known a name to investors which is common for smaller sized niche companies, nevertheless GCT has landed at the #1 ranking in both VectorVest’s Internet (Software) category out of 49 companies, and broader Internet sector with 200 companies listed. This is a noteworthy and remarkable achievement.
The Internet sector contains four industry components and the Software segment ranks 166 out of 222 industries tracked by VectorVest which is in the bottom 25% of the category. Therefore, GCT has not only outpaced its competitors, but it is also a highly ranked VST stock (66th out of 9,138) which translates to the top 0.08% of all stocks. And this is occurring while the software industry is poorly ranked in the VectorVest universe which makes GCT’s performance even more appealing. These characteristics are very unusual and attest to the stock’s positive positioning going forward.
Moreover, the company is not popular among institutions as only 42 hold 33.4% of their 31 million shares outstanding with management holding a very high 52% stake. None of the top ten holders are well known large institutions, but much smaller and less well known firms. This lack of interest by large firms is not a positive, as those are the type of firms that can push the stock price higher as they buy more shares.
GCT’s Four “Excellent” Metric Ratings, November Yearly High, and Significant Undervaluation Are Positive Signs Going Forward, But It has a Poor Safety Score
The VectorVest software issues buy, sell, or hold recommendations on 9,141 stocks. This proprietary stock rating system splits the data into three simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each is measured on a scale of 0.00-2.00, with 1.00 being the average for quick and easy interpretation, and 2.00 being the best.
The VectorVest ratings for GCT are as follows:
- Excellent Upside Potential: The Relative Value (RV) rating focuses on a stock’s long-term, three-year price appreciation potential. The current RV rating for GCT is 1.49 which is exceptionally high. Moreover, VectorVest determined that GCT is significantly undervalued with a calculated value of $18.31. Therefore, the stock can move another 37.4% before reaching the value placed on it from its current price of $13.33.
- Poor Safety: The Relative Safety (RS) rating is based on the company’s business longevity, financial predictability/consistency, debt-to-equity ratio, and additional risk parameters, including price volatility. Its RS rating of 0.78 is well below average, indicating above average risk. Therefore, long-term conservative investors should steer away from this stock.
- Excellent Timing: The Relative Timing (RT) rating focuses on the price trend over the short, medium, and long term. The components include price direction, dynamics, and price magnitude of price changes over daily, weekly, quarterly, and yearly comparisons. GCT has an exceptionally high RT rating of compared to the average 1.02 RT of all the stocks in the database.
- Very Good Comfort Index: This index measures the consistency of a stock’s long-term resistance to severe and lengthy corrections. This index compares the individual stock to the fluctuation of the VectorVest Composite price. With a CI rating of 1.27, GCT rating is above average. Therefore, this is another positive metric indicates that it is suitable for long-term conservative investors, just the opposite of the conclusion for the Safety rating.
- Excellent Earnings Growth Rate (GRT): GCT has annual sales of $584 million and a 38% forecasted growth rate measured over a forecasted three-year period which is exceptional. Moreover, its sales growth of 39% over the last year is considered outstanding. These two fundamental factors provide evidence of a growing company on the path to future growth. Additionally, these factors are calculated in the VectorVest software, so you don’t have to try to find these numbers on other websites.
- Excellent VST Score: The VST Master Indicator ranks 9,141 stocks from high to low and brings to the top of the rankings those stocks with the highest VST scores. GCT’s score is 1.39. Using VST enables users to determine stocks that are performing much better than average, as well as the opportunity to find the cream of the crop with a few mouse clicks. GCT certainly falls into that category.
One positive factor is that the MACD crossed to the upside on December 1. Another is that the Relative Timing (RT) metric has vaulted higher since December 4 and is at a very favorable 1.64.
On the negative side, the price is stretched at 34% above its 40-dma, which is excessive and may result in a decline by 5 to 10% from here to its 40-dma which is in the range of $10.50 to $11.00, or possibly continuing its march higher. A price decline of around 7% would place it in the recent trading range shown by the two horizontal lines on the chart that are $8.00 on the low side and $11.45 on the high side.
The RSI (14) reading (not shown on the graph) is at 73.3, a high level, and a bit overbought, but nothing to be concerned about.
With an increasing EPS trend, and a current ROE of 32.9%, this stock has all of the key characteristics of a long-term winner. However, it does not pay any dividend. The average daily volume of 625,000 shares is reasonable, certainly sufficient for both traders and investors looking for a multi-year hold.
VectorVest currently rates GCT a “Buy” as of December 5 at $58.97. Since then, the stock has moved higher. Based on all the stock’s positive characteristics, this stock should be placed on investors’ watchlists for a possible buy when it gets above $14 per share with a stop loss at $12.10.
You can easily check out VectorVest’s future ratings on this stock before making any move. Analyze GCT free using VectorVest to determine the current recommendation which can change at any time based on market conditions.
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