Here’s what to know beyond why the Trade Desk (TTD) is a trending stock
The trading post (TTD) is one of the most watched stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Shares of this digital advertising platform operator have returned -13.3% over the past month compared to the -6% change in the Zacks S&P 500 composite. Zacks’ internet services sector, to which The Trade Desk belongs , gained 1% over this period. Now the key question is: where could the stock be heading in the near term?
Although media reports or rumors of a material change in a company’s business outlook usually cause its stock to trend and result in an immediate price change, there are always certain fundamental factors that ultimately determine the buy and hold decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.
The Trade Desk is expected to post earnings of $0.21 per share for the current quarter, representing a year-over-year change of +16.7%. Over the past 30 days, the Zacks consensus estimate has remained unchanged.
For the current year, the consensus earnings estimate of $1.01 indicates a change of +11% from the prior year. Over the past 30 days, this estimate has remained unchanged.
For the next fiscal year, the consensus earnings estimate of $1.23 indicates a change of +22% from what The Trade Desk is expected to report a year ago. Over the past month, the estimate has remained unchanged.
With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent change in the consensus estimate, along with three other factors related to earnings estimates, resulted in a Zacks #3 (Hold) ranking for The Trade Desk.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a business.
In the case of The Trade Desk, the consensus sales estimate of $365.22 million for the current quarter indicates a year-over-year change of +30.5%. Estimates of $1.58 billion and $2.01 billion for the current and next fiscal year indicate changes of +32.4% and +26.8%, respectively.
Latest reported results and history of surprises
The Trade Desk reported revenue of $315.32 million in the last reported quarter, representing a year-over-year change of +43.5%. EPS of $0.21 for the same period versus $0.14 a year ago.
Compared to Zacks’ consensus estimate of $304.41 million, reported revenue is a surprise +3.59%. Surprise EPS was +31.25%.
The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus earnings estimates every time during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to traditional and unconventional valuation metrics to rank stocks from A to F (an A is better than a B; a B is better than a C; and so on), is quite useful in determining whether a stock is overvalued, correctly priced, or temporarily undervalued.
The Trade Desk is rated D on this front, indicating that it is trading at a premium to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information about Zacks.com might help determine whether it’s worth paying attention to the market buzz about The Trade Desk. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.