GitLab’s Growth Appealing, But Dilution Makes Investment Unattractive
May 18, 2023
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GITLAB ($NASDAQ:GTLB): GitLab Inc. is a software development platform that provides open source and private cloud based services for software development teams.
However, despite its growth and potential, investors may be wary of investing in GitLab Inc. due to the dilution of its shares. Dilution occurs when a company issues new shares, which reduces the proportion of ownership that current shareholders have. This can lead to a decrease in stock price and can make an investment in the company unattractive.
In addition, dilution can also lead to a decrease in the value of an existing shareholder’s stake in the company, as each share now represents a smaller portion of ownership. Though GitLab Inc.’s growth is appealing, the dilution of its shares makes an investment in the company an unattractive option for investors. Therefore, despite its potential as a software development platform, investors may be better served by looking elsewhere.
Market Price
GITLAB INC shares have been on a positive run this week, with Wednesday’s opening price of $30.4 and a closing price of $31.8, representing a 4.9% increase from the prior closing price of 30.3. Despite such promising performance, however, investors should be aware of the potential risks associated with investing in this tech company. GITLAB INC has been experiencing strong growth over the past year, with both revenue and profits increasing, and its stock price has been on an upward trajectory.
However, it is important to note that the company has also conducted numerous capital raises, leading to dilution of existing shares. This means that due to the large number of new shares being issued, the value of investments held by existing investors is diminished. Therefore, while GITLAB INC’s impressive growth is attractive, the associated dilution makes investing in the company unappealing. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for Gitlab Inc. More…
| Total Revenues | Net Income | Net Margin |
| 424.34 | -172.31 | -40.6% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for Gitlab Inc. More…
| Operations | Investing | Financing |
| -77.41 | -605.69 | 97.48 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for Gitlab Inc. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 1.17k | 344.48 | 5.1 |
Key Ratios Snapshot
Some of the financial key ratios for Gitlab Inc are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| 73.5% | – | -49.8% |
| FCF Margin | ROE | ROA |
| -19.7% | -17.2% | -11.3% |
Analysis
As GoodWhale, we have performed an analysis of GITLAB INC‘s financials. According to Star Chart, GITLAB INC is strong in asset and growth, but weak in dividend and profitability. This leads us to classify GITLAB INC as a ‘Cheetah’ type company, meaning it has achieved high revenue or earnings growth, but is considered less stable due to lower profitability. Given GITLAB INC’s profile, investors looking for strong growth in a less stable stock may be interested in this company. GITLAB INC also has a high health score of 7/10 with regard to its cashflows and debt, indicating it is capable of paying off debt and funding future operations. This could be attractive to investors looking for a solid company with growth potential. More…
Peers
Its competitors are ATTRAQT Group PLC, UserTesting Inc, and Tymlez Group Ltd.
– ATTRAQT Group PLC ($LSE:ATQT)
FATRAQT Group PLC is a publicly traded company with a market capitalization of 60.47 million as of 2022. The company has a return on equity of -7.65%. The company is involved in the development and marketing of software products and services.
– UserTesting Inc ($NYSE:USER)
UserTesting Inc is a publicly traded company with a market capitalization of 1.07 billion as of 2022. The company has a return on equity of -27.62%. UserTesting Inc is a provider of on-demand human insights, enabling companies to measure and improve the digital user experience. The company was founded in 2007 and is headquartered in San Francisco, California.
– Tymlez Group Ltd ($ASX:TYM)
Tymlez Group Ltd is a technology company that provides enterprise software solutions. The company has a market cap of 19.79M and a Return on Equity of -82.23%. The company’s products and services include enterprise application integration, business process management, and cloud computing. Tymlez Group Ltd was founded in 2000 and is headquartered in Amsterdam, the Netherlands.
Summary
GitLab Inc has seen a sharp increase in its stock price over the past few weeks, driven by a strong growth in revenue and customer base.
However, the company’s high level of dilution — a measure of how ownership is spread out among shareholders — has raised concerns among investors. With its stock trading at prices above what is seen as fair value, analysts suggest buyers may want to wait for an entry point more favorable to the investor. Despite this, the company’s future prospects remain bright and some have suggested that CEO Sid Sijbrandij’s leadership has positioned the company for long-term success. Investors should also consider the fact that GitLab’s platform offers a unique value proposition in a rapidly growing market, and may be well worth investing in, with the potential for significant returns.
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