The recent performance of The Trade Desk Inc (TTD, Financial) has caught the attention of investors, with a daily loss of -16.66% and a three-month decline of -16.84%. Despite these setbacks, the company has reported an Earnings Per Share (EPS) of $0.26. This raises the question: is The Trade Desk significantly undervalued? The following analysis aims to shed light on the company's valuation, inviting readers to delve deeper into the financial intricacies of The Trade Desk (TTD).
Company Introduction
Understanding The Trade Desk's business operations and history is crucial in evaluating its stock value. As a provider of a self-service platform for advertisers and ad agencies, The Trade Desk has revolutionized the way digital ad inventory is purchased across various devices. Since its IPO in 2016, the company has seen a remarkable average annual revenue growth of 43%, maintaining profitability with operating margins between 10% and 28%. With a current price of $64.01 and a GF Value estimated at $112.76, The Trade Desk appears to be significantly undervalued. This discrepancy between the stock price and its estimated fair value sets the stage for an in-depth valuation analysis.
Summarize GF Value
The GF Value is a unique metric that determines the intrinsic value of a stock, factoring in historical trading multiples, a GuruFocus adjustment for past performance, and future business projections. When a stock trades significantly below this line, it suggests potential for higher future returns, while trading above it may indicate overvaluation and poorer future performance. The Trade Desk (TTD, Financial), with its current share price well below the GF Value Line, is positioned as significantly undervalued, implying promising long-term returns for its investors.
Financial Strength
Before investing in a stock, it's vital to assess the company's financial strength. The Trade Desk boasts a cash-to-debt ratio of 5.66, outperforming 59.58% of its peers in the Software industry. With an overall financial strength rating of 8 out of 10, The Trade Desk's robust financial position lessens the risk of permanent loss for its stockholders.
Profitability and Growth
Investing in profitable companies, particularly those with a history of consistent profitability, is generally less risky. The Trade Desk has a commendable track record, being profitable for 9 out of the past 10 years. With a $1.70 billion revenue and an operating margin of 8.5%, The Trade Desk's profitability is strong, ranking better than 67.26% of companies in the Software industry. Furthermore, the company's average annual revenue growth rate of 31.7% is impressive, signaling its capacity to create value for shareholders.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) is another way to gauge profitability. The Trade Desk's ROIC of 11.02 exceeds its WACC of 11.55, indicating that it is generating value for its shareholders.
Conclusion
In conclusion, The Trade Desk (TTD, Financial) is significantly undervalued according to our analysis. The company's strong financial condition and profitability, coupled with its impressive growth, make it an attractive investment. However, its growth ranking is lower than some of its competitors in the Software industry. For a more comprehensive understanding of The Trade Desk's financials, investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
