Which Social Media Stocks have the Strongest Earnings Trends: Facebook, Zynga, Linkedin, Groupon or Yelp?

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’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 social media stocks rank via earnings trends:

Facebook, Inc. (NASDAQ:FB): Current Price $28.40

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 272.00 777.00 1,974 3,711 5,089
Diluted EPS ($) -0.06 0.10 0.28 0.46 0.01

Revenue is growing robustly at Facebook, but EPS has taken a toss in the latest 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 ($) in millions 1,131 1,058 1,184 1,262 1,585
Diluted EPS ($) 0.14 0.09 -0.08 -0.02 0.02

Quarterly revenue is also growing at a nice clip, but EPS was under strain in June and September 2012. Obviously, profitability has turned around in December. Facebook stays on our radar…

Zynga, Inc. (NASDAQ:ZNGA): Current Price $3.17

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 19.41 121.47 597.46 1,140 1,281
Diluted EPS ($) -0.18 -0.31 0.11 -1.40  -0.21

Though revenue at this online game company is growing well, we are concerned with the splash of red ink on its books.

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 ($) in millions 311.24 320.97 332.49 316.64 311.16
Diluted EPS ($) -1.411 -0.12 -0.03 -0.07  0.01

Four out of the five quarters show a negative EPS, though the last quarter is in the black. We’ll surely find better candidates out there…

Groupon Inc (NASDAQ:GRPN): Current Price $5.72

Fiscal Year 2008 2009 2010 2011
Revenue ($) in millions 0.01 14.54 312.94 1,610
Diluted EPS ($) -0.01 -0.02 -1.33 -1.03

We see that revenue grew from nothing in 2008 to over a billion in 2011. But shareholders don’t get much joy with the consistently red EPS figures…

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

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 430.16 492.16 559.28 568.34 568.55
Diluted EPS ($) -0.18 -0.02 -0.02 0.04 0.00

Interestingly, revenue has plateaued over the last three quarters, but EPS is still…zilch. We’ll have to skip this daily deals company…

Linkedin (NYSE:LNKD): Current Price $157.42

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 78.77 120.13 243.10 522.19 972.30
Diluted EPS ($) -0.11 -0.10 0.07 0.11  0.44

LinkedIn has certainly boosted its revenue and profits over the last three years — revenue is up over four-fold and profits have multiplied over 6 times.

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 ($) in millions 167.74 188.46 228.21 252.03 303.61
Diluted EPS ($) 0.09 0.04 0.03 0.02  0.35

The quarterly numbers are excellent, too, and the company surpassed itself in the December quarter. This one looks really promising…

Yelp Inc (NYSE:YELP): Current Price $21.72

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 3.75 12.14 25.81 47.73 83.28
Diluted EPS ($) 0.00 -0.16 -0.19 -0.71 -1.10

Good topline growth here, but unfortunately, losses are ballooning.

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

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 22.30 24.90 27.38 32.65 36.37
Diluted EPS ($) -0.24 -0.59 -0.31 -0.03 -0.03

However, we note that the quarterly revenue is growing smartly and the negative EPS is steadily reducing. But, of course, we must pass on Yelp.

Conclusion

Without a doubt, LinkedIn is the hands-down winner of this ”E-Squared” investment analysis of social media stocks because of its blazing earnings performance in both the latest annual and quarterly periods.

“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!