Inuvo Could Hit 65% Earnings CAGR Through 2018: How To Play It

• On Tuesday, Roth Capital initiated coverage on Inuvo Inc INUV with a Buy rating and a $4.50 12-month price target.
• The firm’s thesis is based on the company’s potential to deliver earnings growth at a 65 percent CAGR over the next three years.
• Shares of Inuvo are up roughly 2 percent on Tuesday trading.

In a report issued Tuesday, analyst William Gibson explains that Roth’s investment thesis on Inuvo is based on a belief that “SearchLinks and other technology refinements could enable Inuvo earnings growth at a 65% CAGR”

Through 2018, outpacing the 29 percent revenue CAGR expected over the period.

SearchLinks was launched last July, pairing targeted ads with publisher content to provide online and mobile content publishers an ameliorated version of native-style advertising, the note explains. This market, BI Intelligence estimates, will reach $7.9 billion in 2015, and $21 billion by 2018.

A Look Into Inuvo’s Business

Gibson explains that, “Inuvo operates a scalable, end-to-end digital advertising platform combining state-of-the-art ad-serving technology, patent protected software that monitors the quality of traffic and data-driven search engine marketing.” In addition, it has been operating its own Internet publishing business for three years now. It also offers online and mobile advertising services.

Moreover, Inuvo has been cash flow positive for more than three years now, and profitable for roughly two years. Management now aims for revenue to surpass $100 million in 2017, and analysts at Roth think “the people, technology and market positioning are in place to reach that goal.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.