I’m looking to buy a dynamic growth stock for my ISA in the next couple of weeks. But my options are quite limited with valuations high across many sectors.

There is one stock on my watchlist that keeps calling my name though, even more so after the firm’s impressive second-quarter results. Here’s why I’m interested.

Automating the warehouse supply chain

Symbotic (NASDAQ: SYM) is a robotics firm backed by Softbank and Walmart that builds and operates automated warehouse systems, using artificial intelligence (AI) in its software.

Its robotic solutions improve efficiency and productivity for customers like Albertsons and Target, as well as Walmart. They can handle many tasks, including picking and packing, and the stacking and unstacking of goods onto pallets. This is all controlled by a warehouse management software system.

If that sounds familiar to Ocado, it is in some ways. But what I like here is that Symbotic doesn’t have a low-margin grocery business as its bread and butter. It’s a pure-play automation company.

And unlike Ocado, its overall business is growing rapidly and may turn profitable much sooner.

Very strong progress

In its fiscal second quarter, which ended 30 March, the company’s revenue surged 59% year on year to $424m, topping analysts’ estimates.

And while it’s understandably still prioritising growth over profit right now, it did post an adjusted EBITDA of $22m, versus an EBITDA loss of $55m in the equivalent period last year. So it’s encouraging to see progress towards profitability being made.

Management said: “We started three system deployments and completed three operational systems, while achieving faster revenue growth, higher margins and stronger cash generation than planned for the quarter.”

For the current third quarter, the company expects revenue of $450m-$470m and adjusted EBITDA of $27m-$29m. For context, revenue was $176m, with an adjusted EBITDA loss of $22m, in the equivalent quarter just two years ago.

The stock is up around 300% since June 2022. However, it still looks reasonably valued on a forward price-to-sales (P/S) multiple of around 1.7. And brokers forecast actual profits in the next two years.

Risks to consider

Symbotic has only been a public company since 2022 and is still unprofitable. There have been countless high-growth companies that have come to market looking like the real deal before falling apart. Peloton Interactive is a recent example.

So the risk here is that the firm never translates growth into sustainable bottom-line profits for shareholders. It recorded a net loss of $41m in Q2 and robotics remains a capital-intensive industry.

On the other hand, the global warehouse automation market opportunity is enormous. It’s expected to reach $71bn by 2032, up from $16.2bn in 2022, according to Precedence Research. Symbotic and Softbank put it much higher, naturally.

This growth will be driven by further adoption of e-commerce, advances in AI technology, and rising labour costs and shortages that make automation a more attractive option for companies.

The growth of warehouse automation seems almost inevitable to me. After all, robots require maintenance, but they don’t need sleep or dinner breaks. They don’t ask for higher pay or occasionally ring in sick.

As an innovator, Symbotic could capture significant market share as the industry grows. If it achieves its full potential, I imagine its value will soar.