It isn't a stretch to say that the start of the pandemic to today has been one of the most fascinating and gripping periods ever for investors. We went from despair to elation to extreme caution in the blink of an eye. Growth investing, all the vogue in late 2020, is out of favor. But long-term investors shouldn't kick growth stocks to the curb entirely.
Growth stocks that revolutionize industries have "multibagger" (the ability to compound multiple times) potential, and hitting on these can lead to an early, more comfortable retirement.
If you're on the hunt for an impressive growth stock with multi-bagger potential, The Trade Desk (TTD -0.54%) is worth considering. After all, The Trade Desk is transforming the advertising industry and could ultimately prove to be a massive winner in the process.
Let's take a look at why the stock should be on your radar today.
How is The Trade Desk unique?
Advertising is complex these days. Broadcast television is being replaced by connected television (CTV) and video (TV and videos streamed online). Advertisers need spots on mobile and desktop websites, social media, and elsewhere as well. In advertising, using multiple mediums is known as "omnichannel" marketing. Even further, advertising dollars are limited, so effectively and efficiently reaching the target audience is crucial.
The Trade Desk's user-friendly platform solves this problem by offering billions of omnichannel ad spots daily and data for audience targeting and measuring campaign effectiveness. It doesn't replace advertising agencies; it works in concert with them to maximize reach and effectiveness.
CTV and shopper marketing (brands that advertise on websites, mobile apps, and in-store displays of retailers) are tremendous growth areas. Streaming services are moving to ad-supported subscriptions, and The Trade Desk has a reach of 90 million households and 120 million CTV devices, making this the company's most prolific growth area.
The Trade Desk partners with major retailers like Walmart, Target, and Walgreens in the shopper marketing arena. In fact, the company estimates that it works with 80% of the largest U.S. retailers already. Digital shopper marketing is relatively new and fertile ground for expansion.
The Trade Desk is a revenue compounder
The Trade Desk has increased its sales by nearly 700% since going public in 2016, as shown below.
Data source: The Trade Desk. Chart by author.
Management's guidance for 2022 shows 32% growth, with the most revenue dollars added ever. This looks like it can continue for a long time given the massive opportunities mentioned above.
Debt-free with plenty of cash
Sometimes fast-growing companies finance their rise by racking up long-term debts -- not so with The Trade Desk. The company is significantly cash-flow positive, which allows it to accumulate liquidity, while remaining long-term debt free.
TTD Cash and Short-Term Investments (Quarterly) data by YCharts
The excellent balance sheet is terrific news for long-term investors since the company has the money to sustain operations and fund advancement without saddling itself with loans to pay back in the future.
Considerable potential for investors
The Trade Desk could push sales to $5 billion annually in five years with 26% compound annual growth. This appears reasonable given its track record of higher growth and market opportunity. If this happens, the stock could triple in price by maintaining its current price-to-sales ratio (which is much lower than it traded for before the pandemic).
Many are legitimately concerned that an advertising slowdown will slow growth as the country flirts with a recession. However, efficiency is one of The Trade Desk's most significant differentiators. Targeted advertising reduces waste, and advertisers could see The Trade Desk as a terrific alternative to expensive television spots. Investors should always consider dollar-cost averaging to minimize risk in our turbulent market.
While not without risk, stocks like The Trade Desk can supercharge returns and possibly lead to a prosperous and early retirement.
