THE TRADE DESK INC-CL A (NASDAQ:TTD) – A Strong Contender for Quality Investors

THE TRADE DESK INC-CL A (NASDAQ:TTD) stands out as a compelling candidate for quality investors, meeting key criteria for long-term growth, profitability, and financial health. The company operates a cloud-based ad-buying platform, serving clients across digital advertising channels, including connected TV, mobile, and display.

Why TTD Fits the Quality Investing Profile

• Strong Revenue & EBIT Growth: Over the past five years, TTD has delivered an impressive 18.9% annual revenue growth and 30.7% EBIT growth, well above the screen’s minimum threshold of 5%. This indicates both top-line expansion and improving operational efficiency.
• High Return on Invested Capital (ROIC): With an ROIC of 25.5%, TTD generates substantial returns on capital deployed, a hallmark of a well-managed business with competitive advantages.
• Zero Debt & Strong Cash Flow: TTD carries no debt, and its free cash flow conversion is exceptional, with a 5-year average profit quality of 337%, far exceeding the 75% benchmark. This reflects strong cash generation relative to reported earnings.
• Profitability & Margins: The company maintains industry-leading margins, including an 80.1% gross margin and 17.6% operating margin, demonstrating pricing power and cost efficiency.

Valuation Considerations

While TTD scores highly on growth and profitability, its valuation is elevated, with a P/E of 46.6 and forward P/E of 37.8. Quality investors often accept higher multiples for companies with durable competitive advantages, but further analysis is needed to assess whether the current price justifies future growth expectations.

Analyst Expectations

Analysts project 18.9% annual revenue growth and 21.8% EPS growth over the next three years, suggesting continued expansion in digital advertising demand.

For more stocks that fit the Caviar Cruise quality investing criteria, check our Caviar Cruise screener.

Disclaimer

This is not investment advice. Always conduct your own research before making investment decisions.