Fastly Inc (FSLY, Financial) has recently caught the attention of investors with its notable stock performance. The company's market capitalization stands at $2.7 billion, with a current price of $20.62. Over the past week, Fastly's stock price has seen a 4.98% gain, and looking at the past three months, the gain is even more impressive at 26.67%. According to the GF Value, the stock is currently fairly valued at $21.48, a slight decrease from the past GF Value of $28.28, which indicated the stock was significantly undervalued. This shift in valuation reflects the stock's recent upward trajectory and suggests that the market is recognizing Fastly's potential.
Introduction to Fastly Inc
Fastly Inc operates within the competitive software industry, specializing as a content delivery network provider. The company's innovative approach to edge computing and dynamic content delivery sets it apart from traditional CDNs. Fastly's strategic focus on fewer, network-dense data centers allows for more sophisticated programming on its platform, catering to the needs of large enterprises. In 2022, the United States market contributed nearly three-fourths of Fastly's revenue, highlighting its strong domestic presence.
Assessing Fastly's Profitability
Fastly's Profitability Rank is currently at 3 out of 10, which suggests challenges in this area. The company's operating margin is at -40.94%, which, while not ideal, is better than 17.56% of 2,750 companies in the same sector. Fastly's return on equity (ROE) is -16.16%, surpassing 27.58% of its peers, and its return on assets (ROA) stands at -8.72%, outperforming 31.23% of competitors. The return on invested capital (ROIC) is -15.48%, which is higher than 26.75% of similar companies. These figures indicate that despite negative margins and returns, Fastly is performing better than a significant portion of its industry counterparts. 
Growth Prospects of Fastly
Fastly's Growth Rank stands at an impressive 8 out of 10. The company has experienced a 6.60% 3-year revenue growth rate per share, which is better than 45.7% of 2,394 companies. Over a 5-year period, the revenue growth rate per share is 20.10%, outperforming 81.44% of 1,880 companies. Future estimates suggest a total revenue growth rate of 18.76% over the next 3 to 5 years, which is higher than 79.8% of 490 companies. However, the 3-year and 5-year EPS without NRI growth rates are -36.90% and -43.70%, respectively, indicating that profitability has been a challenge. The estimated EPS growth rate for the next 3 to 5 years is -14.20%, which, while negative, is still better than 2.42% of 124 companies. These mixed signals in growth metrics highlight Fastly's potential for revenue expansion, albeit with profitability concerns. 
Key Shareholders in Fastly
Notable investors have taken an interest in Fastly, with George Soros (Trades, Portfolio) holding 555,689 shares, representing a 0.42% stake in the company. Jim Simons (Trades, Portfolio) follows closely with 531,100 shares, accounting for a 0.41% share. Joel Greenblatt (Trades, Portfolio) holds a smaller position with 14,600 shares, equating to a 0.01% stake. These holdings reflect the confidence that these prominent investors have in Fastly's future prospects.
Competitive Landscape
When compared to its competitors, Fastly's market capitalization of $2.7 billion positions it within a close range of PagerDuty Inc (PD, Financial) at $2.43 billion, Bumble Inc (BMBL, Financial) at $1.92 billion, and Jamf Holding Corp (JAMF, Financial) at $2.48 billion. This proximity in market cap among these companies within the software industry underscores the competitive environment in which Fastly operates.
Conclusion
In summary, Fastly Inc's recent stock performance has been robust, with a significant 26.67% gain over the past three months. The company's valuation has shifted from significantly undervalued to fairly valued, reflecting the market's adjustment to its growth trajectory. While profitability remains a challenge, Fastly's growth prospects are promising, particularly in terms of revenue. The company's strategic focus on edge computing and dynamic content delivery, combined with the backing of notable shareholders, positions it as a noteworthy player in the software industry. As Fastly continues to innovate and expand, it will be interesting to see how it stands up to its competitors and whether it can improve its profitability metrics in the future.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
