AIM stocks are capable of delivering huge gains over short periods of time. As a growth-focused, risk-tolerant investor, I simply can’t ignore them. One that’s hit my radar recently is Tremor International (LSE: TREM). I wish this had happened sooner. Its share price has almost doubled in 2021 alone. In the last year, it’s up more than 400%! Is there more to come?
Winning AIM stock
Headquartered in Israel but with offices around the world, Tremor is a leader in Video and Connected TV advertising. Its platform helps clients, such as Amazon and Disney, “reach relevant audiences and publishers to maximize yield on their digital advertising inventory“. As one might suspect, the gradual recovery in economic conditions and business confidence over the last year or so has been a boon to the company.
This month’s results — covering trading in the first half of 2021 — showed a company in rude health. Revenue more than doubled to $152.4m. In addition to being completely organic, CEO Ofer Druker said that this growth was “one of the highest” across Tremor’s peer group. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rocketed a staggering 3,545% to $64.8m year-on-year.
Another reason for the share price rise is the recent listing on NASDAQ (home of tech titans such as Alphabet and Facebook). Having a joint listing in the US should allow is to raise more money in the future to help fund acquisitions as well as provide working capital. Almost $129m was raised from the IPO in June.
Can it continue?
Unsurprisingly, Tremor’s management is bullish on the company’s outlook. It now expects Q3 revenue (excluding traffic acquisition costs) of “at least” $75m and adjusted earnings of around $37m. However, this is dependent on no “major Covid-19-related setbacks that may cause economic conditions to deteriorate or otherwise significantly reduce advertiser demand“. To be fair, I think this would apply to most listed firms.
But isn’t this encouraging guidance already reflected in the price? Well, 26 times earnings is what I’d need to pay for the stock right now. That’s high, although arguably not excessive compared to elsewhere in the market. Knowing that the company looks very financially secure helps takes the sting out (TRMR has zero debt and had $275.5m in cash at the start of July). I don’t mind paying up for stocks as long as they look sufficiently resilient.
However, it’s worth me being aware of a few things. For one, the Tremor share price has had some very volatile days. Last Friday, for example, it was down 4%. In the past, it’s had a few days where it has climbed and fallen by double-digit percentages. A low ‘free float’ might be partly responsible.
While not a risk as such, it’s also worth stating that there’s no dividend stream. So, if I were hunting for income, I’d need to look elsewhere.
Tremor International is a fine example of how AIM stocks can provide incredible returns over a short period. And while buying one year ago would clearly have been a far better thing to do, I must say that I still like the look of the shares now.
As long as I maintain a diversified portfolio (somewhat mandatory for those fishing for winners in the junior market), I’d be comfortable picking up some TRMR when markets reopen tomorrow.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, and Walt Disney. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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