As a long-term investor, sometimes it really can pay to wait. One growth share I first bought years ago has lost huge amounts of value. But it finally looks like it might be starting to come good.

It has already moved up 105% since the start of this year. I believe it could still go far higher.

A shooting star that fell to earth

The company is S4 Capital (LSE: SFOR), a digital advertising agency network founded by Sir Martin Sorrell after he left WPP eight years ago.

In its first several years, there was great excitement about S4. Sorrell had a glittering record of wealth creation and S4 was growing fast. In 2021 its share price was over £8.

Then the wheels came off.

Audited accounts were delayed and investors got concerned about the debt load taken on to fund an acquisition spree. Later, AI was seen as a risk to the company’s core offering.

Towards the end of last year, the S4 share price was as low as 16p.

Signs of a turnaround in fortunes

Then things changed. Net debt was reduced faster than expected.

AI was still seen by some investors as a threat, but others shared the company’s view that AI could actually help it do better because of its purely digital focus. A dividend was introduced, then raised last month.

I added to my holding several times over the past couple of months and plan to hold for the long term.

S4 Capital shares have been on fire lately. Not only have they more than doubled so far this year. They have more than doubled in the past month!

This still looks cheap to me

There could be issues ahead, of course. The founder remains central to the company, posing a key man risk.

And while net debt has been reduced, it is still £87m. That may not sound huge given the company has a £280m market capitalisation, but the company reported a £25m loss last year and revenue fell 11%.

So, why do I still see the current share price as a potential bargain?

That loss may look bad but ad agencies typically have lots of non-cash expenses, like amortising intellectual property. Last year S4 generated £87m of free cash flow. Cash flow from operations was £128m.

That means that the enterprise value (market cap plus the net debt) is a little under three times operating cash flow. For a tech company with renowned leadership and a strong client base, I see that as cheap.

Could it soar even from here?

Just because this growth share once sold for pounds does not mean it will again.

But the business clearly has momentum. Net debt is being reduced fast, cash flows are strong and I buy into the argument that AI could end up accelerating S4’s competitive position not diminishing it.

At around eight times adjusted basic earnings per share, the current share price looks cheap.

The company is looking to boost its operational earnings before interest, tax, depreciation and amortisation (EBITDA) margin from around 12% to 20% over time, in part thanks to thinning its workforce.

That could boost earnings significantly. Combined with an improved balance sheet, I see that as potentially enough to push the share price up substantially, in coming years.