Shares of The trading desk (TTD 0.93%) rose more than 12% in a single session after the company reported its second-quarter 2024 results on August 8. The big jump was not surprising, as the programmatic advertising provider delivered stronger-than-expected growth.

The Trade Desk’s recent price increase means the stock is up 36% so far this year. Plus, it’s currently trading at a high price. Does that mean it’s too late for investors to buy this growth stock? Or can they still consider adding The Trade Desk to their portfolio in anticipation of further price gains? Let’s find out.

The Trade Desk steps on the gas

The Trade Desk reported second-quarter revenue of $585 million, up 26% from the same quarter last year, when revenue rose 23% year-over-year, suggesting the company’s growth is accelerating. At the same time, adjusted earnings rose 39% year-over-year to $0.39 per share. With revenue of $578 million, Wall Street would have been satisfied with earnings of $0.36 per share.

However, the company beat those estimates thanks to an acceleration in connected TV (CTV) advertising. The Trade Desk’s data-driven, programmatic advertising platform enables advertisers to buy ad inventory in real time and deliver ads across multiple channels, including CTV, online video, mobile and e-commerce channels.

The company operates in a fast-growing market, with the global programmatic advertising market expected to generate $595 billion in revenue this year, a figure that is expected to grow to $779 billion by 2028. More importantly, The Trade Desk has integrated artificial intelligence (AI) into its platform to help advertisers better target audiences and generate higher returns on advertising dollars spent.

In the latest earnings call, CEO Jeff Green pointed out that clients who adopted The Trade Desk’s AI-powered advertising platform Kokai saw a 70% increase in reach as well as a 27% improvement in cost per acquisition. So it’s not surprising that The Trade Desk grew faster last quarter compared to the same period last year.

The good news is that The Trade Desk believes its total addressable market could eventually be worth $1 trillion. Therefore, it would not be surprising if the company maintained its healthy growth levels over the long term and grew faster than the market expected. For example, The Trade Desk expects revenue of at least $618 million for the quarter ending in September. That would be a 25% increase from the same period last year and well above the consensus expectation of $605 million.

However, there is a good chance that The Trade Desk will exceed its own expectations, as the company has seen impressive success in the programmatic advertising space. Unsurprisingly, analysts have raised their earnings growth expectations for the company.

TTD EPS estimates for the current fiscal year, data from YCharts. EPS = Earnings Per Share.

But is it worth buying the stock now?

The Trade Desk’s solid 2024 run rate means it now trades at a pricey 23 times sales, significantly higher than the U.S. tech sector average of 7.3. Its trailing earnings multiple of 194 and forward earnings multiple of 130 also suggest a rich valuation.

However, there is one valuation metric that tells us that growth investors can still consider buying The Trade Desk. The stock’s price-to-earnings-growth (PEG) ratio, which takes into account potential earnings growth, is 0.55, as we can see in the chart below.

TTD PEG Ratio (Forward 1 Year) data from YCharts. PEG Ratio = Price to Earnings to Growth Ratio.

The PEG ratio is a forward-looking valuation measure calculated by dividing a company’s price-to-earnings ratio by its expected earnings growth in the coming years. A value below 1 means a stock is undervalued relative to its potential growth.

Investors looking to add a growth stock to their portfolios may want to take a closer look at The Trade Desk despite its high earnings and revenue metrics. Those concerned about the valuation would do well to take advantage of any potential dips to buy the shares and capitalize on the healthy long-term growth opportunities the company offers.