Amidst a fluctuating market, The Trade Desk Inc (TTD, Financial) has experienced a notable daily loss of -16.66% and a three-month decline of -16.97%. With an Earnings Per Share (EPS) at $0.26, investors are questioning whether the stock is significantly undervalued. This article delves into the valuation analysis of The Trade Desk (TTD) to uncover the stock's true investment potential.
Company Introduction
The Trade Desk provides a cutting-edge self-service platform for advertisers and agencies to programmatically acquire digital ad inventory across various devices. Since going public in 2016, The Trade Desk has demonstrated robust revenue growth at an average annual rate of 43%. The company's impressive financials, including a market cap of $31.40 billion and sales of $1.70 billion, coupled with an operating margin of 8.53%, reflect its profitability and operational efficiency. Considering its current stock price of $64.01 against the GF Value of $96.89, The Trade Desk appears to be significantly undervalued—a scenario that warrants a closer look at its intrinsic value.
Summarize GF Value
The GF Value is a unique metric that determines a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. It suggests an ideal fair trading value for a stock. When a stock like The Trade Desk (TTD, Financial) trades significantly below this line, as it does at its current price, it indicates a strong likelihood of superior future returns, as the stock is considered significantly undervalued.
Because The Trade Desk is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth, presenting an attractive opportunity for value investors.
Financial Strength
Assessing a company's financial strength is crucial to avoid the risk of permanent capital loss. The Trade Desk's cash-to-debt ratio of 6.13 outperforms 60.58% of the companies in the Software industry, indicating a fair financial strength rating of 7 out of 10. Such metrics provide investors with confidence in the company's ability to manage its debt effectively.
Profitability and Growth
The consistent profitability of a company is a less risky prospect for potential investors. The Trade Desk has maintained profitability for nine out of the past ten years. With a revenue of $1.70 billion and an Earnings Per Share (EPS) of $0.26, coupled with an operating margin of 8.53%, the company's profitability ranks strongly at 8 out of 10. In terms of growth, The Trade Desk's 3-year average revenue growth rate surpasses 85.22% of its peers in the Software industry, although its EBITDA growth rate is less impressive, ranking lower than 55.64% of its industry counterparts.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insight into its value creation. The Trade Desk's ROIC of 11.96% slightly exceeds its WACC of 11.69%, indicating the company's effective use of capital to generate returns. This comparison is a positive sign for investors seeking companies that create shareholder value.
Conclusion
In summary, The Trade Desk (TTD, Financial) is significantly undervalued with a solid financial condition and strong profitability. Despite mixed growth rankings, the company's stock presents a compelling value proposition. For a detailed exploration of The Trade Desk's financials, interested investors can review the 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.
