Digital Turbine (APPS -3.14%) has been one of the best-performing stocks in the last year. Since the pandemic-fueled stock market meltdown last spring, shares are up over 2,000%. That would be an incredible run in a decade's time, let alone in a single 12-month stretch.

The company's media discovery platform was a big winner last year, but this small company could be just getting started in its growth story -- perhaps hastened by Apple (AAPL -1.22%) and Alphabet's (GOOGL -1.23%) (GOOG -1.10%) Google deciding to eliminate on-device activity tracking.

Don't expect anything close to what happened to Digital Turbine stock in 2020 again, but here's why shares are worth a look anyway. 

The future of retail is ... hardware?

Before delving into some recent and notable developments for Digital Turbine, it's important to understand the role the company plays in the digital economy. App and software developers are a type of modern manufacturer -- but of digital goods and services.

Woman lying on the floor using a smartphone

Image source: Getty Images.

And think of the mobile device as a kind of modern take on the retail store. It's the method of selling virtual apps and services to consumers, and the device maker (and/or the app store, like Apple's App Store or Google Play) takes a cut of the final sales price just like an actual retailer does. 

Digital Turbine acts like a logistics operation (like a delivery truck hauling goods to a store) that helps app developers get their creations onto the virtual "shelves" of devices -- and for device makers to get more efficient at monetizing the retail of the apps consumers want.

It helps device manufacturers and mobile operators get content in front of users via things like pre-loaded apps on devices (all that stuff already there when you first turn on your new phone, tablet, smart TV, etc.), an "app wizard" that recommends downloads during device setup, or an app "discovery widget" on the home screen of a device.  

Hindsight is 20/20, and it's now crystal clear this stock was undervalued last spring. With lockdowns, social distancing, and work-from-home suddenly a daily part of life, people around the globe were spending more time than ever in front of a screen. Along the way, Digital Turbine has delivered stellar growth.

Revenue is up 86% through the last trailing 12-month stretch to $258 million -- including a 146% year-over-year increase in sales to $88.6 million during the company's fiscal 2021 third quarter (the three months ended Dec. 31, 2020) and a 134% increase in free cash flow during the period to $16.6 million.  

The cat's out of the bag, and Digital Turbine is a tiny undiscovered gem no longer. It's gone from a price-to-sales ratio of less than three a year ago to well over 30 as of this writing.  

Three quick acquisitions to strengthen app discovery

Is the hefty price tag for Digital Turbine stock worth it? With Apple and Google phasing out individual app and device tracking (a key component of marketing and monetization campaigns for software developers), Digital Turbine's growth could have legs under it. Device manufacturers and developers will be in need of new ways to make money, and Digital Turbine's platform could continue to pick up new business as a result. 

It's done some work of its own to double down on its app discovery platform. It acquired peer Mobile Posse last March, and it announced three more takeovers of digital advertising and engagement firms since February 2021 (AdColony for up to $375 million, Triapodi for $22.5 million, and Fyber for $600 million). Most of these deals will be paid by the issuance of new Digital Turbine stock, but likely some debt will be raised as well. It remains to be seen how all the pieces will work together and what kind of financial results they'll deliver, but the result will be one of the largest mobile ad tech firms around.

There are risks, though. Google has said it will work with software developers and content creators to forge direct relationships with customers. Apple is also seemingly funneling some iOS users to its own ecosystem of applications. Given it's by far the most popular smartphone device in the U.S., Digital Turbine doesn't have much to gain if Apple dominance spreads overseas (where Android is still some 80% of the global mobile market). Nevertheless, with mobility on the rise, there could be plenty more room for this company to carve out some more share of the mobile ad pie for itself.  

Personally, I'm not interested in chasing returns on one of the hottest stocks of the last year. I'm in wait-and-see mode and will look for some guidance when the company reports on its final quarter of its 2021 fiscal year (and, more importantly, provides an outlook for fiscal 2022) later this spring.

But given changes in the mobile industry, Digital Turbine's moves to consolidate app delivery and discovery services under its platform, and a small-ish market cap shy of $8 billion, it certainly looks like this could be a long-term growth story in the making. The stock is at the very least worth a follow.