I'm willing to bet that most investors wish they'd bought shares of then-obscure digital advertising technology company The Trade Desk (TTD 0.66%) when it went public in 2016. It closed its first day of trading around $3 per share (adjusted for its stock split), meaning a $10,000 investment then would be worth $200,000 today.

Already a 20-bagger, many investors believe it's far too late to buy The Trade Desk stock. And indeed, there is at least one risk for investors to be aware of. But you may be surprised by just how early it may be in The Trade Desk's journey as a business.

A word on valuation risk

Valuing a stock is a complex exercise full of nuance. This applies to valuing The Trade Desk stock as well. But let's keep things simple: The price-to-sales (P/S) valuation for The Trade Desk stock right now is around 18, which is about double what it was when the company went public. The chart below helps illustrate this.

TTD Revenue (TTM) Chart

TTD Revenue (TTM) data by YCharts

Therefore, I believe it's fair to say The Trade Desk's business has grown remarkably since going public, and this is responsible for its market-beating performance. But its valuation has also become more expensive over time.

Some might argue that The Trade Desk has proven to be a high-quality business since going public and that's why the market now values it more highly. It's a fair point.

However, I'm acknowledging valuation here because this is a risk for investors. Typically, companies with higher growth rates demand higher P/S ratio valuations. However, The Trade Desk's valuation has increased while revenue growth is clearly slowing. For example, revenue in 2022 was up 32% year over year whereas revenue in 2021 was up 43%.

TTD PS Ratio Chart

TTD PS Ratio data by YCharts

To conclude this point, I believe that The Trade Desk's valuation will come down over time and herein lies a risk for investors. Hypothetically, if the company's revenue doubles but the valuation gets cut in half, the stock price would stay the same. Therefore, to beat the market, The Trade Desk needs to grow enough to counteract the negative impact of a potentially lower valuation long term. And that won't be easy.

That said, it's absolutely not too late for long-term investors to buy The Trade Desk stock. Here are two reasons the company has an incredible opportunity.

Two reasons it's not too late

The advertising revolution underway in North America has yet to gain momentum internationally. In the fourth quarter of 2022, about 90% of the advertising spend on The Trade Desk's platform came from North America.

However, according to data cited by The Trade Desk from third-party research group IDC, about two-thirds of all global ad spending comes from international markets. The Trade Desk's revenue has increased roughly tenfold since going public because North America is rapidly shifting to digital advertising. And it's reasonable to assume the same will eventually happen in international markets, which is a larger opportunity.

For what it's worth, The Trade Desk is preparing for this international opportunity. It already has a presence in important markets including the U.K., South Korea, Japan, Indonesia, Australia, and more.

Here's another reason it's not too late: While its revenue is up roughly tenfold, The Trade Desk "only" generated revenue of $1.6 billion in 2022. This is an incredibly small number compared to the market opportunity that management believes is approaching $1 trillion.

Consider the opportunity in video advertising alone. According to IDC, there's an estimated $60 billion that advertisers are already spending on traditional TV that will move to mobile and connected TV by 2026. The Trade Desk could prove an ideal partner for these advertisers in this regard, considering it claims to reach over 120 million CTV devices right now.

The potential for international expansion and capturing a growing CTV market are just two examples that demonstrate that The Trade Desk is nowhere near its ceiling. And that's why I'd say it's not too late to buy the stock, valuation risk acknowledged.