Taboola’s 11.1% return over the past six months has outpaced the S&P 500 by 7.7%, and its stock price has climbed to $3.90 per share. This performance may have investors wondering how to approach the situation.
Is it too late to buy TBLA? Find out in our full research report, it’s free.
Why Does Taboola Spark Debate?
Often appearing as those "You May Also Like" or "Recommended For You" boxes at the bottom of news articles, Taboola (NASDAQ: TBLA) operates a digital platform that recommends personalized content to users across publisher websites, helping both publishers monetize their sites and advertisers reach target audiences.
Two Positive Attributes:
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Taboola’s 10% annualized revenue growth over the last five years was impressive. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. New Investments Bear Fruit as ROIC Jumps
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Taboola’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.
One Reason to be Careful:
EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Taboola’s full-year EPS dropped 52%, or 11% annually, over the last four years. We’ll keep a close eye on the company as diminishing earnings could imply changing secular trends and preferences.
Final Judgment
Taboola has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 6.1× forward P/E (or $3.90 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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