Key Points
Rocket Lab provides a comprehensive approach to the burgeoning space economy.
In addition to growing its revenue and gross profit, Rocket Lab has grown its backlog.
Growth investors should consider opening a position in Rocket Labs.
Rocket Lab has been one of the strongest-performing stocks on the Nasdaq in 2024, soaring by more than 380% since the start of the year.
That's impressive, but how have longer-term investors in Rocket Lab fared? For those who bought the stock back in December 2021 and held on through the ensuing turbulence, the return on their investment in this leading space stock has been a little less lofty.
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Improving financials and a growing backlog
After completing a reverse merger with a special purpose acquisition company (SPAC), Rocket Lab first started trading on the public markets on Aug. 21, 2021. An investor who waited a few months after the stock's Nasdaq debut and bought $1,000 worth of shares on Dec. 14, 2021, would've seen their investment's value sink by more than 80% during the years that followed. But in spring 2024, the stock finally turned a corner. After its rebound, that $1,000 investment made three years ago would be worth a little more than $2,600 at Tuesday's prices.
While Rocket Labs is still unprofitable, investors have celebrated the company's success in growing sales over the past two years as well as achieving profitability on a gross profit basis -- two green flags that this growth company is, indeed, growing.
Additionally, investors bid the stock higher amid confidence that Rocket Lab is poised for continued revenue growth. At the end of the third quarter, it had a backlog of $1.05 billion, an 80% increase over its backlog at the same time last year.
Is now the time to go for a ride with Rocket Lab?
Since Rocket Lab is unprofitable, investors can't assess the stock using a profit-based valuation metric like price-to-earnings ratio. And with the stock trading near its all-time high, investors may be hesitant to click the "buy" button. However, the company's revenue and gross profit growth demand recognition, and its growing backlog suggests that clients are enthusiastic about enlisting Rocket Lab to assist them in the deployment of space-based assets. For these reasons, Rocket Lab certainly warrants the attention of growth investors who are interested in adding space stock exposure to their portfolios.
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