AcuityAds Holdings (ATY) offers a marketing platform that enables advertisers to connect with their audiences across online display, video, social and mobile campaigns, notes Faris Sleem, low-priced stock specialist and editor of The Bowser Report.
Its platform also allows advertisers to manage their purchasing of online display advertising in real-time using programmatic ad buying. The company serves Fortune 500 enterprises and small-to-mid- sized businesses worldwide.
Although the stock price has drifted lower over the past year, earnings are continuing their bullish trend. Total revenue for the fourth quarter was $36.8 million, representing an increase of 5% year-over-year (YOY) and 34% sequentially. Total revenue for 2021 was $122 million, up 16% YOY and 24% YOY on a constant currency basis.
This increase was mainly driven by illumin, the company’s intuitive advertising platform that enables customers to visualize the process and maximize marketing effectiveness.
AcuityAds showed up on our radar because of the significant improvements to its balance sheet. The company raised capital via financing and currently has an enormous cash position of $102.2 million. Operating cash flow was $19.7 million in 2021, and the company has a history of healthy cash flows.
AcuityAds is undervalued relative to its competitors. Aside from its price/sales (P/S) ratio, all of its value metrics are significantly lower than the industry average. If earnings continue to grow at this pace, ATY could potentially become a value investment as well.
Since growth stocks have been selling off from the elevated market volatility, this should provide long-term investors with peace of mind as its balance sheet is healthy and bottom-line results are improving.
ATY’s better-than-expected revenue growth, in combination with the strongest balance sheet in company history, gives it tremendous potential. As long as management continues to capitalize on the numerous opportunities in the advertising industry, we are optimistic about its future.
We believe an ideal entry point for AcuityAds is below $2.40, but investors can consider buying the stock under $3.
