Which Website Stocks Have the Strongest Earnings Trends: Yahoo, Google, Microsoft, InterActiveCorp or AOL?

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 website stocks rank via earnings trends:

Yahoo! Inc. (NASDAQ:YHOO): Current Price $21.36

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 7,209 6,460 6,325 4,984 4,987
Diluted EPS ($) 0.29 0.42 0.90 0.82 3.28

Though annual revenue at Yahoo has been sliding, and is down 30% in 2012 compared to 2008, the company reported an excellent EPS in 2012.

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 ($) in millions 1,324 1,221 1,218 1,202 1,346
Diluted EPS ($) 0.24 0.23 0.18 2.64 0.23

Is the Marissa Mayer effect at work here? Revenue has grown impressively in the latest quarter, though EPS has dived. Sadly this means we’ll have to pass on Yahoo…

AOL, Inc. (NYSE:AOL): Current Price $37.16

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 4,153 3,246 2,417 2,202 2,192
Diluted EPS ($) -14.42 2.35 -7.34 0.12 11.21

Though revenue at AOL has bottomed out, we see a sharp jump in its EPS during 2012.

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 ($) in millions 576.80 529.40 531.10 531.70 599.50
Diluted EPS ($) 0.21 0.22 10.17 0.22 0.41

We see that the last quarter in 2012 has been something of a turnaround, as both revenue and EPS have made a favorable u-turn. We’ll keep AOL on the list…

Google Inc. (NASDAQ:GOOG): Current Price $783.22

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 21,800 23,650 29,320 37,900 50,180
Diluted EPS ($) 13.31 20.41 26.31 29.76 32.31

We are impressed with the consistent growth in revenue and EPS at Google these past five years.

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 ($) in millions 10,580 10,640 12,210 14,100 13,220
Diluted EPS ($) 8.24 8.75 8.42 6.53 8.61

Revenue rose nicely into the September 2012 quarter, but lost some in December. More importantly, EPS jumped nicely in that quarter. Google remains in our reckoning…

Microsoft (NASDAQ:MSFT): Current Price $27.97

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 60,420 58,440 62,480 69,940 73,720
Diluted EPS ($) 1.87 1.62 2.10 2.69 2.00

Revenue at Microsoft grew nicely between 2010 and 2012, and so did EPS until 2011. However, the company lost its profit momentum in 2012, it seems.

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 ($) in millions 20,880 17,410 18,060 16,010 21,460
Diluted EPS ($) 0.78 0.60 -0.06 0.53 0.76

We see that Microsoft has turned things around over the last three quarters, boosting both revenue and EPS. That looks good…

IAC/InterActiveCorp. (NASDAQ:IACI): Current Price $42.32

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 1,410 1,347 1,637 2,059 2,801
Diluted EPS ($) -1.08 -7.06 0.93 1.85  1.98

We see that revenue at IAC got some rocket fuel after 2010, and EPS has also picked up well since then.

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 ($) in millions 596.94 640.60 680.61 714.47 765.25
Diluted EPS ($) 0.53 0.38 0.47 0.43  0.70

Though quarterly revenue is also growing nicely, EPS is somewhat inconsistent. But there’s a good lift in the December EPS out there. Now, let’s see how it stacks up against the biggies…

Conclusion:

We have a problem of plenty here and four out of the five companies here have made the grade. We pick Google for its strong revenue and earnings momentum on both the annual and quarterly time-frames and also because it is the only company that has not reported any EPS, annual or quarterly in the red.

“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!