The Rubicon Project Inc: Will This $8.61 Tech Stock Double Again?

The Rubicon Project Inc: Will This $8.61 Tech Stock Double Again?More Upside Ahead?

Despite its volatility, the technology sector remains one of most attractive places for profit-seeking investors.

Looking around, there are plenty of tech stocks that have delivered astronomical returns to their shareholders in recent years.

And you don’t need to go with the big-name tech companies that trade at hundreds of dollars per share—if not more—to get a piece of the action.

Lower-priced tech stocks are worth considering too. A recent example of a small tech company that has rewarded investors big-time is The Rubicon Project Inc (NYSE:RUBI).

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Headquartered in Los Angeles, Rubicon Project is in the digital advertising business. The company started back in 2007 and has grown to become one of the largest digital advertising exchanges in the world. (Source: “The Global Exchange For Advertising: November 2019,” The Rubicon Project Inc, last accessed December 23, 2019.)

Every month, Rubicon Project’s technology helps execute billions of advertising transactions for the world’s leading agencies and brands.

Commanding a market capitalization of around $453.0 million, Rubicon Project is not a big company by any means. But like I said, investors of this small tech stock have earned some serious returns.

Consider this: on December 21, 2018, RUBI stock closed at $3.12 per share. At the time of this writing, it is trading at $8.61 per share. So in about a year, Rubicon Project stock has more than doubled.

The Rubicon Project Inc (NYSE:RUBI) Stock Chart

Chart courtesy of StockCharts.com

Wall Street tends to have high expectations for high-flying tech stocks, yet Rubicon Project has had no problem beating those expectations.

Over the past 12 months, the company has outperformed analysts’ bottom-line estimates in all four quarters. (Source: “The Rubicon Project, Inc. (RUBI),” Yahoo! Finance, last accessed December 23, 2019.)

Looking at the company’s latest earnings report, we see that Rubicon Project generated $37.6 million of revenue in the third quarter of 2019. (Source: “Rubicon Project Reports Third Quarter 2019 Results,” The Rubicon Project Inc, November 6, 2019.)

Driven by strong video and audio revenue, that represented a 27% increase from the same period a year earlier.

One of major trends in the digital space is consumers moving from desktop computers to mobile devices. And Rubicon Project has done a great job capitalizing on that trend. In the reporting quarter, 58% of the company’s revenue was derived from mobile channels.

What’s more impressive, though, is what the company managed to achieve in terms of adjusted earnings before interest, tax, depreciation, and amortization (EBITDA).

In the third quarter of 2018, Rubicon Project incurred an adjusted EBITDA loss of $1.4 million. Fast forward one year and the company delivered $6.1 million in adjusted EBITDA, translating to an adjusted EBITDA margin of 16%.

Going from negative to positive in this key performance metric is a big milestone for the digital advertising company. And the best could be yet to come.

For the fourth quarter of 2019, management expects the company to generate $47.0 to $48.5 million of revenue while bringing its adjusted EBITDA margin close to 30%. (Source: “The Global Exchange For Advertising: November 2019,” The Rubicon Project Inc, op. cit.)

A Major Opportunity on the Horizon

Of course, there are plenty of tech companies working on more exciting stuff than digital advertising. But keep in mind that, even with what Rubicon Project has going on right now, it could benefit from a major opportunity.

You see, Rubicon Project’s platform helps automate the buying and selling of online advertising. The automated process is often referred to as “programmatic advertising.”

It is estimated that global programmatic advertising spending will increase from $34.0 billion in 2018 to $60.0 billion in 2022. If the company manages to capture just a small share of this growing market, it should be able to take its financials to a whole new level. (Source: Ibid.)

Analyst Take

Ultimately, keep in mind that small-cap tech stocks are generally not considered the safest bets.

But for those with a bit more risk tolerance, the growth potential of The Rubicon Project Inc should make it worth considering.