A great balance sheet plus zero debt could mean PubMatic (PUBM 7.14%) is a winning stock for the long-term. In this clip from "Ask Us Anything" on Motley Fool Live, recorded on May 4, Motley Fool contributor Jon Quast discusses why he believes in PubMatic's potential for the long-term.
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Jon Quast: Technically, this is three of my most recent five purchases, but I'm lumping it into one. But yeah, I was buying the stock here early March. Again, this is as the market was hitting a very low point. It rose a little bit, now it's retesting those lows. But yes, I was buying PubMatic stock. Basically, if you add all of this up, I doubled my position in PubMatic over these three days. It is now my third highest cost basis, which is surprising to me as I looked at that. In terms of the value, right now it's the eighth largest of my retirement portfolio. Basically, I'm a big believer in what is happening in the ad market more than anything. I believe that so many ad dollars are still being funneled through traditional advertising sources. To me, advertising is going to be more digital, not less digital over time, and it's going to be more programmatic, not less programmatic over time. What programmatic means is that it's targeted. It's to you. They're going to know certain things about you. The viewer, the consumer, whatever it is, publishers want to do better targeting, and they're going to have programmatic capabilities and that is what PubMatic allows. They partner with publishers. They're not a competitor to The Trade Desk (TTD 2.69%). They are complementary. One of the interesting things about PubMatic, maybe I should just go ahead and share it still following my screen here. Zoom (ZM 1.57%) always likes to be right in the way. Here we go. This is a very profitable company on a net income GAAP basis.
Jose Najarro: Jon, you are still on your slide. I think you only have that.
Quast: Okay. Hold on. Let me retry that. How's that?
Quast: Okay. As you can see here, it's very profitable on a GAAP basis and the profit margins are increasing. Right here, this is the year that just finished 25% GAAP net income. That's just fantastic for a company that is in hypergrowth mode. The other thing that I really like to see here is this net dollar-based retention. Customers are spending more money with them over time. You see this is 2019, 2020, 2021. It's just ticking up the spending per customer there, per existing customer. They're also signing on a ton of new customers. Again, their customers are publishers. I just see that this signals to me that publishers do like what PubMatic is offering. They're increasing their spending. It's a profitable business. It's a great balance sheet. It's got something in the ballpark of $120 million in cash and no debt and doesn't plan to take on debt. I like to trend, I like the company. I think it's strong, and so that's why I'm buying a lot of it.