Technology developer Universal Display (NASDAQ: OLED) is on a roll. The stock has more than doubled in 2019, nearly quadrupled in three years, and turned a $10,000 investment from 2009 into more than $180,000.

Does this market-crushing stock have more room to run, or is it time to take a step back from Universal Display? Let's have a look.

Image source: Getty Images.

How Universal Display makes money

The company's organic light-emitting diode (OLED) technologies are found in many smartphones and tablets, as well as some high-end TV sets. Apple (NASDAQ: AAPL) started incorporating OLED screens in 2017's iPhone X and is rumored to be planning OLED displays for all iPhone models starting in 2020. The OLED industry is expected to generate $30 billion of sales this year, according to comments by Universal Display CEO Steve Abramson. Three years later, Universal Display is staring down a global target market of roughly $45 billion.

The mobile market is fairly saturated these days; even Apple is reporting iPhone sales below the year-ago figures. So Universal Display's growth opportunity here consists of expanding the role of OLED displays in a mature industry. However, smartphones and tablets are becoming a smaller target next to exploding demand for OLED-based television screens.

Universal Display collects royalties and material sales based on the total area of OLED screens sold. Therefore, one 60-inch TV screen does as much for the company's top and bottom lines as 97 or so 6-inch smartphone displays. OLED TV sets will account for a total revenue-generating area near that of its mobile siblings this year, before expanding to a huge majority:

Image source: Universal Display.

Beyond this incredible market opportunity, OLED technology is finding its way into general lighting applications. In this market, OLED elements provide thin and light panels with low electric-power needs. The panels can be transparent, flexible, and shaped to fit spaces that might not make sense for traditional LED elements. It's a bit early to estimate the size of the addressable market, but Universal Display's management sees lighting as a target equal to, or even larger than, the display industry.

All of this is to say that Universal Display has only scratched the surface of an epic business opportunity.

But isn't the stock too expensive, anyway?

Sure, Universal Display is valued like the overheated growth stock it is. After the gains I reported above, the stock is trading at 81 times trailing earnings, or 61 times the company's book value. That's a hefty price tag by any standard.