Undiscovered Growth Stock

Direct Digital Holdings (NASDAQ:DRCT) fulfills the parameter of an undiscovered stock. The company’s market cap is still under $400 million. The stock has more than doubled since the start of February and will report earnings later this month.

That earnings report will shed light on the advertising company’s profit margin growth. High revenue growth is assured. The company reported 129% year-over-year revenue growth in the third quarter of 2023. Guidance suggests revenue will more than double, and we will figure out on March 21, 2024, if that’s the case. 

Direct Digital Holdings is a programmatic advertiser based in Houston that specializes in buy-side and sell-side advertising. The company’s sell-side platform, Colossus Media, is doing most of the work for the company’s finances. New partnerships announced in 2024 suggest it’s picking up more traction.

Unlike many small-cap stocks, DRCT is profitable, and this is where the opportunity can become massive. The company more than quadrupled its net profits year-over-year in the third quarter, bringing the Q3 number up from $0.8 million to $3.4 million. 

Shares trade at a forward P/E ratio of 28. If net profit margins continue to rise, the valuation will get even better. The company can reach a $1 billion market cap soon as long as net income growth continues to outpace revenue growth. We will know more after the company releases its earnings report this month.