It's been a tough year for the overall stock market, but an even tougher year for many growth stocks. Shares of The Trade Desk (TTD 1.67%), a provider of a data-driven digital-ad buying platform, are among the stocks that have taken severe beatings. Year to date, shares have slid about 45%, as of this writing.

Just because a stock is down sharply doesn't automatically make it a buy. Many growth stocks arguably deserved their beatings -- particularly those that aren't profitable yet. After all, higher interest rates mean the cost of capital is higher, and lower stock prices mean raising equity is much more difficult. Many growth stocks, therefore, should be trading substantially lower than they were earlier this year.

But this macroeconomic environment also sheds light on how companies that are able to fund business growth through cash from operations have significant advantages over their unprofitable peers today. The Trade Desk's financials are extremely healthy, making it one of those advantaged companies. Not only does it generate substantial free cash flow, but it also has no debt. This, combined with the company's strong market leadership, makes its shares look attractive at this level.

Strong financials

The Trade Desk is a cash cow. Of its approximately $388 million in trailing-12-month revenue, $108 million (or 28%) was converted to free cash flow -- the cold, hard cash left over after both regular business operations and capital expenditures are taken care of. 

Turning over to the company's balance sheet, The Trade Desk has bout $1.2 billion of cash, cash equivalents, and short-term investments. As The Trade Desk's CFO Blake Grayson said in the company's second-quarter earnings call, "[T]he strength of our business model and balance sheet have positioned us well." Indeed, just as many other companies are slowing the pace of their investments, The Trade Desk is in a position to increase the pace of its investments and "focus on the long-term growth of the business," Grayson explained.

An underappreciated competitive advantage

While financial strength is working in The Trade Desk's favor during this market, another important driving force for the ad-tech company is its competitive structural positioning. First, The Trade Desk is one of the few ad-buying platforms with significant scale that's able to remain independent and objective on behalf of its customers. Not only does The Trade Desk not own any of its own content, but it also serves only ad buyers, not publishers. This means ad agencies can trust that The Trade Desk's incentives are aligned with their goals.

Further, The Trade Desk's independent and objective platform has so much reach across ad verticals, geographies, and audiences that it's becoming increasingly indispensable to ad agencies. This is particularly evident by the company's strong revenue growth recently.

The Trade Desk's second-quarter revenue increased 35% year over year. This occurred as dominant digital-advertising players Alphabet and Meta Platforms saw their advertising revenue increase 11.6% and decrease 1.5%, respectively. The Trade Desk argues in its earnings calls that its market share gains are, in part, due to its platform becoming the "default" demand-side platform for the open internet and connected TV.

All of this is saying that it may make sense to buy the dip on The Trade Desk stock.