YuMe — NYSE:YUME

About YuMe

YuMe, Inc. engages in the provision of digital video brand advertising solutions. It provides multi-screen programmatic video advertising technology, which connects advertisers, digital media property owners, and consumers of video content across a range of internet-connected devices for branding solutions.

The company was founded by Jayant Kadambi and Ayyappan Sankaran on December 16, 2004 and is headquartered in Redwood, CA.

$4.73
Entry Price
$3.66
Share Price
-1%
Trade Return
422
Trade age — days

Overview

The company went through a transformation at the end of 2016. Replaced the CEO and key executive staff, drastically cutting operating expenses and returning the company to profitability.

In the last 12 months, the company focus has been expanding its programmatic advertising business with Q4 2016 revenue in this space at $9.4m up from $1m year on year. Programmatic advertising is the growth driver for the Trade Desk (NASDAQ:TDD) which is on my waiting list to purchase if the price comes back to a more reasonable level.

Recent profitability turn around has come from cutting costs. Looking to see revenue growth from new customers in the coming quarters to justify a 30+ PE driven by programmatic advertising. (TDD is on a forward PE of 40).

Growth Drivers

  • Programmatic advertising is driving growth within existing customer base
  • Looking for growth in overall revenue / new customers for YuMe to go to the next level
  • Potential takeover target (TDD?)

Risks

  • Number of customers has been decreasing, need to see that increase in the coming quarters.
  • Company is doing a review with Deutche bank of the whole business - which could impact on the future direction / focus of the company.
  • Executive team is doing a great job at returning the company to profitability, however expect they are an interim executive and new blood will need to be brought in once things stabilise.

Valuation Metrics

Forward PE ratio is 8, but should be at least 20-30. In addition, YUME has $2 / share in cash, indicating the underlying business is only valued at $2.77 - providing a forward PE of 4.6.

Given a forward PE of 25 and an expected EPS of $0.60 produces price target of $15 and a return of 215%. There is potential upside of 20% with the EPS figure given seasonal trends, plus room for a higher PE ratio if strong revenue growth starts in the coming 12 months (as expected).

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Stock notes

15 Aug 2018

$1.03 Dividend

YUME went ex Dividend on 29th June 2017 with funds received 3 July 2017.

Dividend was quarterly of $0.03 plus a special dividend of $1.00 due to excess cash.