We had a couple quarter updates come through on Thursday evening last week, too late to make it into the Friday File… so I thought I’d take a look at those quickly and see if they change our thinking at all. Three companies to check on today, one of which ends up being an add-on buy for me… let’s get to it.

The Trade Desk (TTD) is our ad-tech superstar stock, it essentially makes money by taking a portion of all the advertising orders placed using their buy-side programmatic advertising platform, which provides targeting technology and tracking and incorporates advertiser data to help give customers (big advertisers and ad agencies) a much more data-rich ad buying experience, and hopefully a more effective advertising campaign. They’ve been growing rapidly for many years, and have always been (barely) profitable, at least on an adjusted basis (they have pretty egregious executive compensation and stock-based compensation, which is one thing that turns some investors off), and they’ve become a pretty vocal leader of the “advertisers can’t rely on the closed networks of Google or Meta” movement (CEO Jeff Green calls those companies, which suck in the vast majority of online advertising dollars, the “walled gardens”). Their growth has long been juiced by the growing push for advertising in streaming television, which can bring a personalized and data-rich ad technology to the big screen (and therefore dramatically improve ad sales for streaming content companies, since advertisers will pay more for ads that are more personalized and more effective), but they have their fingers in most kinds of digital advertising (and have ambitions about adding traditional non-digital advertising to their programmatic ad-buying platform, too).

And it has also always been an expensive stock. Even before COVID, it sometimes traded at 20X sales… and during the 2021 market mania it got up to a valuation of more than 50X sales. The company has been profitable since its IPO, but it has also traded at more than 100X GAAP earnings for almost all of the past five years, and today it’s at 200X GAAP earnings. Even though the huge impact of stock-based compensation helps out quite a bit, TTD is also quite expensive on an adjusted basis (which is the numbers that most analysts use, and the company highlights), the PE ratio using adjusted earnings is still in the 40s. Which means TTD is a ...