Yahoo Finance Should You Be Concerned About The Trade Desk Inc’s (NASDAQ:TTD) Earnings Growth?
Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess The Trade Desk Inc’s (NASDAQ:TTD) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
View our latest analysis for Trade Desk
Did TTD beat its long-term earnings growth trend and its industry?
TTD’s trailing twelve-month earnings (from 30 June 2018) of US$55.5m has jumped 58.4% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 76.1%, indicating the rate at which TTD is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.
In the last few years, revenue growth has failed to keep up which indicates that Trade Desk’s bottom line has been driven by unsustainable cost-reductions. Looking at growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 39.2% in the previous year, and 22.3% over the past five. This growth is a median of profitable companies of 25 Internet companies in US including Dragon Victory International, SPS Commerce and Sino-i Technology. This shows that any uplift the industry is benefiting from, Trade Desk is able to amplify this to its advantage.
In terms of returns from investment, Trade Desk has fallen short of achieving a 20% return on equity (ROE), recording 18.4% instead. Furthermore, its return on assets (ROA) of 6.7% is below the US Internet industry of 7.2%, indicating Trade Desk’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Trade Desk’s debt level, has increased over the past 3 years from 22.1% to 25.5%.
What does this mean?
Trade Desk’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Trade Desk has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Trade Desk to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TTD’s future growth? Take a look at our free research report of analyst consensus for TTD’s outlook.
Financial Health: Are TTD’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
