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Joining the Nasdaq-100 in July earlier this year, The Trade Desk (TTD 0.97%) and its advertising demand-side platform (DSP) continued along its path toward becoming one of the most influential companies of our era.
Rising around 2,490% since its 2016 initial public offering (IPO), The Trade Desk would have turned a $1,000 investment into nearly $26,000 in just over seven years.
Letting ad buyers choose from more than 500 billion ad opportunities daily, The Trade Desk’s platform helped power revenue and free cash flow (FCF) growth of over 700% since the company’s IPO. Despite this incredible growth operating in a digital advertising industry expected to grow from $616 billion in 2022 to over $1 trillion in 2027, the S&P 500 index is yet to give Trade Desk the green light.
So what will it take for The Trade Desk to join?
First, let’s see if it qualifies.
While there are numerous criteria that a stock needs to meet to join the index, it looks like The Trade Desk checks all the boxes necessary, including:
Additionally, the company meets the liquidity and volume measures needed to join the index, meaning that it’s eligible to be chosen, should it catch the eye of the selection committee.
Along with meeting the basic requirements and delivering tremendous revenue and FCF growth in its short time as a public company, The Trade Desk’s operations sit right at the center of numerous major trends:
Buoyed by these unique growth drivers, The Trade Desk looks well positioned to bring a lot of growth to the S&P 500 Index, particularly as it gradually continues expanding outside of North America.
Ultimately, I believe The Trade Desk is a brilliant selection for the S&P 500 Index. However, it may make for an even better dollar-cost averaging pick for investors to add to on dips over time.
Trading at a price-to-sales (P/S) ratio of 23, the company is not cheap. But it never has been “traditionally cheap” at any point along its path to providing 25x returns to investors.
TTD data by YCharts
Considering this, the S&P 500 and investors alike would be wise to keep The Trade Desk in mind as the company continues to forge its path in the massive world of digital advertising.
Josh Kohn-Lindquist has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk and Walmart. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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