As our world becomes increasingly digital, companies that seek to help advertisers and creators are situated to dominate. And one such company in this space is PubMatic (PUBM): one of the leading solutions for programmatic digital advertising technology. Simply put, this company helps advertisers and content creators reach their audience in a practical and scalable manner.
The company is relatively new. They were publicly listed in December of 2020, and just a few months later, the stock reached an all-time high of just under $65/share. Since that point, though, PubMatic’s share price has been in a perpetual decline. Today, it sits at just $18/share – down almost 36% over the past year. However, it appears that more and more investors are seeing this as a good entry point. And it’s true – the stock is a cheap buy. But does it have the potential to grow beyond where it sits today – or is this a stock that’s slowly dying? That’s what we’re here to discuss today.
One positive with PubMatic is its overall business model. They are certainly the largest sell-side advertising platform right now. While many confuse this business as a competitor to buy-side advertising platforms like The Trade Desk (TTD), they serve entirely different markets. The reason this is relevant? Nobody else is offering creators the same service right now. That means the demand for PubMatic isn’t going anywhere anytime soon. Moreover, the market for PubMatic is primed to grow rapidly over the coming years. We’ve seen an increase in ad spending globally each and every year. Accordingly, earnings have been growing at PubMatic. Despite the continual plummet this company has seen in its stock price this year, they’ve enjoyed a nice EPS growth over the same period.
More importantly, PubMatic is profitable. Despite being regarded as a “small business” when compared to the rest of the publicly traded companies on the stock market, their profits are impressive. The real kicker here is that they’ve been profitable for multiple years in a row – this isn’t a fluke.
When taking all this into consideration, it’s shocking that PubMatic is trading so low right now – and more specifically, has been on a downward spiral for the past 2 years. This brings up a point we mentioned earlier – investors are viewing this as a potential entry point. Should you follow suit and buy PubMatic stock? Before you make your decision, there are a few key findings our stock forecasting system has uncovered – keep reading to learn more…
Despite Growing Earnings & Profitability, PUBM is Risky & Has a Poor Trend Pushing Its Price Down
The VectorVest system simplifies trading for investors by compiling everything you need to know about a stock into three easy-to-understand ratings: Relative Value (RV), Relative Safety (RS), and Relative Timing (RT). These three ratings are shown on a scale of 0.00-2.00 with 1.00 being the average. And together, these metrics make the overall VST of a stock and deem whether our system rates it a buy, sell, or hold. So what’s the deal with PUBM? Here are three key takeaways:
- Good upside potential: the long-term price appreciation potential for PubMatic is slightly above average, with an RV rating of 1.18. With that said, that’s where the good news ends for PUBM. Our system suggests the stock is still overvalued at $18/share. VectorVest has calculated its value at about $13/share.
- Poor safety: RS is an indicator of risk, and is computed based on an analysis of the predictability and consistency of a company’s financial performance, business longevity, and other factors. And right now, PUBM is a risky stock with an RS rating of just 0.77.
- Below average timing: The RT rating indicates what sort of trend a stock’s price is exhibiting – along with the magnitude and strength behind that trend. Anything below 1.00 suggests a downward price trend, while anything over suggests a positive price trend. Right now, PUBM has below-average timing with an RT rating of 0.87.
Taking these three criteria into account, PUBM has a below average VST rating of 0.94. So – should you buy, sell, or hold this stock? The answer may surprise you…get more insight into this company through a free stock analysis.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for PubMatic, it has good upside potential, but poor safety with a negative price trend pushing the stock down.
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