Think It's Too Late to Buy Applied Digital (APLD) Stock? Here's the 1 Reason Why There's Still Time

With its recent price-to-sales ratio of 38, Applied Digital (NASDAQ: APLD) certainly looks like its shares are overvalued. So is it too late to invest in the company? Well, it depends. It might not be.

First, understand its business: It "designs, builds, and operates high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads." That's right -- it's heavily involved in a bunch of fast-growing technologies, as it builds data centers. With data center demand growing, Applied Digital's future looks promising.

Image source: Getty Images.

Consider, too, that the company has inked several multi-billion-dollar deals with CoreWeave (NASDAQ: CRWV) to provide hundreds of megawatts worth of data center capacity over 15 years. Applied Digital's market value was recently $7.5 billion. That's a lot for a company isn't yet profitable -- but bulls see the business being valued far higher in the future.

There's that steep price, though, right? I see several ways you can approach the stock, depending on your risk tolerance:

• If you're a firm believer and expect to own the shares for lots of years, you could do just fine buying in now. In the short term the stock might pull back, but over multiple years, it stands a good chance of growing briskly.
• If you're on the fence about what to do, you might buy into the stock over time. So if you'd wanted to buy, say, $6,000 worth of shares, you might buy $2,000 worth now, $2,000 worth in a few months, and another $2,000 later. If the price drops, you'll get more shares. If it keeps rising, well, you'll at least have an initial position that's in the black.
• If you're intrigued but cautious, perhaps just add the stock to your watchlist, hoping for a pullback and a better price one day. You might never get that lower price, but you'll also not have put money into an overvalued stock.

Whether you invest or not, if you're a seeker of promising growth stocks, give this one a closer look and some consideration.

Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.