Ddespite a decline in stock market performance over the past year, The trading post (NASDAQ: TTD) was still quite profitable on the business side. In this clip from “3 Minute Stocks Updates” on Motley Fool live, recorded on March 2Fool.com contributors Brian Feroldi and Brian Withers discuss the stock’s long-term potential and the fact that it’s valued for growth.
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Brian Feroldi: The Trade Desk has just completed its fourth quarter and the results are quite good. Revenue increased 24% in the quarter to $396 million. This exceeded the high end of management‘s expectations, and it’s also important to note that 24% growth may not sound that impressive. A year ago, there was spending on political ads in the United States. This has not been repeated, so the year-over-year growth rate is even higher if you normalize political spending.
One big thing I like to see, customer retention, this number has remained above 95% for the eighth year in a row. Now the rest of the income statement, not so pretty at least on a GAAP basis. There was a CEO performance award that was spent during the quarter that really drove up company spending.
As a result, net income, at least on a GAAP basis for this company, fell 90% to around $8 million. Now if you take that stock-based compensation award out, adjusted net income increased 13% to $208 million or 0.42 cents per share, so the company is still very profitable on an adjusted basis. and probably on a GAAP basis next year.
Now if you step back for the full year, the full year numbers were just great. Spending on the platform increased 43% to $6.2 billion, revenue increased a similar 42% to $1.2 billion, free cash flow was $320 million. The company noted that the recent rollout of its updated trading platform, which it calls Solimar, is gaining widespread adoption and that its users love it.
The company also launched a recent partnership with walmart (NYSE: WMT) which gives their customers access to Walmart data, and they also announced a new partnership with Walgreens [part of Walgreens Boots Alliance (NASDAQ: WBA)]. This will add to the capabilities of the business. They’ve also launched a new product they call OpenPath, which provides their customers with a direct pipeline to publisher inventory.
Well, management didn’t say it would be a threat to companies like PubMatic (NASDAQ: PUBM). It is possible that these companies may bypass these companies in the future. For 2022, management expects another year of strong growth. First quarter revenue is expected to increase by at least 38%. Management has a history of under-promising and over-delivering. All systems go with The Trade Desk.
Brian Wither: I like this update, Brian. I look at the performance of stocks over the past 12 months and it’s disappointing. It’s actually down a single-digit percentage over the 12 months. Is it time to buy as revenues have increased by 24%, or has the market abandoned this specialist in programmatic advertising?
Feroldi: Yes this company has actually held up remarkably well compared to many other growth stocks that are in the market I think one of the reasons for that is this company is already insanely profitable so they have that at the to come up.
Now to your point, is it a streaming buy today? Maybe, maybe not. This company is still at the cost of extreme growth. Stocks are trading at around 35 times sales, 120 times forward earnings and those earnings are real. It’s not like they’re artificially depressed. Remember that this business is very profitable, so the market has priced this business for growth.
It wouldn’t surprise me if this company languished over the next year or maybe even two as the fundamentals caught up with the stock price. But in the long run, it’s really hard not to like the odds of continued outperformance from this company.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.