Direct Digital Holdings (NASDAQ:DRCT) looks like a hidden gem due to its low market cap and rapid growth. The advertising company has a $140 million market cap and a 32 P/E ratio. The firm is valued at a 14-forward P/E ratio.
Direct Digital Holdings specializes in programmatic advertising. The company offers solutions to the buy and sell side of the digital advertising industry. However, the sell side is where most of the growth resides. The firm has many clients in multiple industries and places an emphasis on small and medium-sized businesses generating $5 million to $500 million in revenue.
Revenue and earnings growth have soared in recent quarters which makes this micro-cap stock look enticing. Revenue surged by 129% year-over-year in the third quarter of 2023. Net income outpaced revenue growth with a 313% year-over-year increase.
The company offered guidance ranging from $170 million to $190 million in fiscal year 2023 revenue. The midpoint represents a 101% year-over-year revenue increase. Sell-side advertising drives this growth with 174% year-over-year revenue growth. The buy-side advertising segment only grew by 10% year-over-year. A low valuation combined with hyper-growth makes DRCT enticing.