Which Internet Stocks Have the Strongest Earnings Trends Ahead of Google Earnings?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 4 internet stocks rank via earnings trends:

eBay Inc. (NASDAQ:EBAY)

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 8,541 8,727 9,156 11,650 14,070
Diluted EPS ($) 1.36 1.83 1.36 2.46 1.99

We see that Ebay has been growing sales nicely, but earnings seem to fall off every other year.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 3,380 3,277 3,398 3,404 3,992
Diluted EPS ($) 1.51 0.44 0.53 0.45 0.57

Though sales have been somewhat static in four out of five quarters, there’s a nice rise in the holiday quarter 2012. Earnings are somewhat unpredictable…

Amazon.com Inc. (NASDAQ:AMZN)

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 14,840 19,170 24,510 34,200 48,080
Diluted EPS ($) 1.12 1.49 2.04 2.53 1.37

We see some pretty regular and solid revenue growth here. Earnings too have kept pace, rising nicely every year until 2010. We’re concerned, however, that they fell off a bit in 2011.

Let’s take a look at the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 10,880 17,430 13,180 12,830 13,810
Diluted EPS ($) 0.14 0.38 0.28 0.01 -0.60

The quarterly performance is a bit jerky, and EPS has plunged during the last four quarters, resulting in a loss in the September 2012 quarter. Avoid this one.

Google Inc. (NASDAQ:GOOG)

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 16,590 21,800 23,650 29,320 37,900
Diluted EPS ($) 13.29 13.31 20.41 26.31 29.76

Here’s a set of solid numbers. Both revenue and EPS have more than doubled over the past five years. Google looks good…

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 9,720 10,580 10,640 12,210 14,100
Diluted EPS ($) 8.33 8.24 8.75 8.42 6.53

But unfortunately, EPS declined in the last two quarters, despite maintaining revenue momentum.

Overstock.com Inc. (NASDAQ:OSTK)

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 765.90 829.85 876.77 1,090 1,054
Diluted EPS ($) -2.03 -0.48 0.33 0.59 -0.84

This company put up a nice show for the first four years here, growing sales and climbing out of a loss into a profit by 2010. It seems to have lost direction a bit in 2011, though.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 239.74 314.08 262.37 239.54 255.35
Diluted EPS ($) -0.33 -0.15 0.12 0.02 0.11

Quarterly sales are flattish, and EPS has see-sawed a bit, falling off in June 2012 and then rising again in September 2012. Not the ideal internet stock.

Conclusion

Unfortunately, none of the four internet stocks listed above pass the high standards of ourĀ “E-Squared” investment analysis. But Google reports today, so let’s see what they can do!

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!