Grid Dynamics Holdings (GDYN) AI Stock Analysis

• Market Cap: $1.09B
• Dividend Yield: N/A
• Average Volume (3M): 757.88K
• Price to Earnings (P/E): 285.2
• Beta (1Y): 1.38
• Revenue Growth: 12.04%
• EPS Growth: N/A
• Country: US
• Employees: 4,730
• Sector: Technology
• Sector Strength: 45
• Industry: Information Technology Services
• EPS (TTM): 0.04
• Shares Outstanding: 83,838,356
• 10 Day Avg. Volume: 759,501
• 30 Day Avg. Volume: 757,875
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 3.89
• Price to Cash Flow (P/CF): 48.20
• P/FCF Ratio: 77.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $22.25
• Price Target Upside: 71.42% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 5

Grid Dynamics Holdings has demonstrated strong revenue growth and a solid balance sheet, but challenges remain in profitability and cash flow management. Technical indicators suggest bearish momentum, and the high P/E ratio raises valuation concerns. The earnings call provides a positive outlook with strategic growth initiatives, which supports the company's overall potential. Despite these positives, the current market conditions and high valuation impact the overall stock score.

Positive Factors

Financial Performance

GDYN's 4Q results were strong and came in above both our and Street expectations on the top and bottom line, as improving organic demand, sound execution, and accretive M&A all helped produce a solid quarter.

Growth Outlook

Management provided a strong outlook which is viewed as especially impressive relative to other IT services providers which have given choppier demand forecasts.

Stock Price Target

The price target for Grid Dynamics Holdings, Inc. has been increased to $26.00.

Negative Factors

Earnings Guidance

The 4Q guidance is above the Street and reflects contribution from these two acquisitions.

Market Uncertainty

The model is approximately at the low end of the guidance range, which allows for macro and demand uncertainty.

Grid Dynamics Holdings Business Overview & Revenue Model

Company Description

Grid Dynamics Holdings, Inc., together with its subsidiaries, provides enterprise-level digital transformation services in the areas of search, analytics, and release automation for Fortune 1000 corporations in North America, Europe, and internationally. It works in collaboration with its clients on digital transformation initiatives that cover strategy consulting, early prototypes, and enterprise-scale delivery of new digital platforms. The company offers technical consulting, software design, development, testing, and internet service operations services. It serves customers that operate in the retail, technology and telecommunications, media, consumer packaged goods/manufacturing, financial services, and other sectors. The company was formerly known as ChaSerg Technology Acquisition Corp. and changed its name to Grid Dynamics Holdings, Inc. Grid Dynamics Holdings, Inc. was founded in 2006 and is headquartered in San Ramon, California.

How the Company Makes Money

Grid Dynamics Holdings generates revenue through a variety of channels primarily centered around custom IT solutions and consulting services. The company's primary revenue stream is derived from its service contracts with large enterprises, where it provides tailored digital transformation solutions. These solutions often involve long-term engagements in which Grid Dynamics collaborates closely with clients to deliver custom software development, IT infrastructure optimization, and cloud migration services. Additionally, Grid Dynamics partners with leading technology vendors, such as cloud service providers, which enhances its service offerings and expands its market reach. The company's revenue is significantly influenced by its ability to secure and maintain sizable contracts with high-profile clients in sectors like retail, technology, and financial services, where there is a constant demand for modernization and innovation in IT infrastructure.

Grid Dynamics Holdings Financial Statement Overview

Summary

Grid Dynamics Holdings demonstrates strong revenue growth and a solid balance sheet with minimal leverage and high equity. While profitability metrics are improving, challenges with negative EBIT and EBITDA margins persist. The cash flow situation requires attention due to recent declines, but substantial cash reserves provide a cushion. Overall, the financial outlook is positive, with areas for improvement in operational profitability and cash flow management.

Income Statement

Grid Dynamics Holdings has shown a consistent growth in revenue, with a 12.03% increase from 2023 to 2024. The gross profit margin improved to 36.22% in 2024, indicating efficient cost management. However, the company still faces challenges with profitability, as reflected by the negative EBIT and EBITDA margins in 2024. Despite this, a positive net profit margin of 1.15% in 2024 is a significant turnaround from previous losses, showcasing an improving bottom line.

Balance Sheet

The balance sheet reflects a strong financial position with a low debt-to-equity ratio of 0.02 and a robust equity ratio of 87.45% in 2024. These figures indicate a solid capital structure with minimal leverage, reducing financial risk. The return on equity (ROE) improved to 0.78% in 2024, highlighting a positive trajectory in utilizing equity effectively. Overall, the company's balance sheet is healthy, with substantial equity and minimal debt obligations.

Cash Flow

The cash flow analysis shows a decline in operating cash flow from 2023 to 2024, with a decrease in free cash flow as well. However, the company maintains a positive operating cash flow to net income ratio of 7.47, indicating efficient cash generation relative to net income. The free cash flow to net income ratio is 4.56, reflecting a stable conversion of net income into free cash flow. Despite the dip in cash flow, the overall cash position remains strong, supported by significant cash reserves.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
350.57M	312.91M	310.48M	211.28M	111.28M
	Gross Profit
127.00M	113.15M	120.59M	87.73M	41.62M
	EBIT
-2.10M	-5.58M	-21.01M	50.00K	-15.45M
	EBITDA
-2.10M	7.69M	-10.81M	5.10M	-12.54M
	Net Income Common Stockholders
4.04M	-1.76M	-29.21M	-7.70M	-12.60M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
334.65M	257.23M	256.73M	144.36M	112.75M
	Total Assets
592.19M	435.17M	411.15M	256.72M	167.13M
	Total Debt
12.63M	11.00M	8.14M	0.00	0.00
	Net Debt
-322.03M	-246.23M	-248.59M	-144.36M	-112.75M
	Total Liabilities
74.36M	52.26M	48.10M	29.67M	15.41M
	Stockholders Equity
517.83M	382.91M	363.04M	227.05M	151.73M
Cash Flow		Free Cash Flow
18.43M	33.22M	25.58M	13.26M	3.68M
	Operating Cash Flow
30.20M	41.09M	31.65M	17.97M	5.93M
	Investing Cash Flow
-51.30M	-25.95M	-16.32M	-35.37M	-18.34M
	Financing Cash Flow
101.16M	-16.32M	97.76M	49.13M	82.97M

Grid Dynamics Holdings Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 12.98
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GDYN, the sentiment is Negative. The current price of 12.98 is below the 20-day moving average (MA) of 14.59, below the 50-day MA of 17.50, and below the 200-day MA of 16.60, indicating a bearish trend. The MACD of -1.23 indicates Negative momentum. The RSI at 31.50 is Neutral, neither overbought nor oversold. The STOCH value of 13.82 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GDYN.

Grid Dynamics Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FORTY	71 Outperform	$1.36B	16.77	12.21%	1.03%	3.51%	18.34%
NABL	68 Neutral	$1.20B	38.48	4.21%	―	10.49%	30.42%
GDYN	63 Neutral	$1.09B	285.15	0.90%	―	12.04%	―
FLYW	63 Neutral	$1.07B	749.57	0.36%	―	22.09%	―
Sector *	58 Neutral	$10.03B	10.00	-6.85%	3.09%	7.49%	-11.58%
TASK	56 Neutral	$1.17B	26.06	9.78%	―	7.64%	5.22%
VYX	43 Neutral	$1.08B	―	-20.40%	―	-54.34%	-34.10%

Grid Dynamics Holdings Corporate Events

Grid Dynamics Updates Director Compensation Policy

Grid Dynamics Holdings has announced updates to its Outside Director Compensation Policy, which include increasing the annual restricted stock unit (RSU) award for the non-executive Chairman of the Board from $20,000 to $30,000, adding annual RSU awards of $40,000 for the chairs of each Board committee, and providing annual RSU awards of $30,000 for members of each Board committee who are not receiving the chair award. These changes reflect the company’s commitment to aligning director compensation with its strategic goals and enhancing governance structures, potentially impacting stakeholder confidence and engagement.