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Long term investing can be life changing when you buy and hold the truly great businesses. And highest quality companies can see their share prices grow by huge amounts. Just think about the savvy investors who held The Trade Desk, Inc. (NASDAQ:TTD) shares for the last five years, while they gained 827%. If that doesn't get you thinking about long term investing, we don't know what will. On top of that, the share price is up 42% in about a quarter. Anyone who held for that rewarding ride would probably be keen to talk about it.
The past week has proven to be lucrative for Trade Desk investors, so let's see if fundamentals drove the company's five-year performance.
See our latest analysis for Trade Desk
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Trade Desk managed to grow its earnings per share at 3.3% a year. This EPS growth is slower than the share price growth of 56% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 556.45.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Trade Desk's earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Trade Desk shareholders have received a total shareholder return of 102% over the last year. That's better than the annualised return of 56% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Trade Desk better, we need to consider many other factors. Even so, be aware that Trade Desk is showing 2 warning signs in our investment analysis , you should know about...