What happened

Twitter (NYSE:TWTR) stock climbed 23.4% in February, according to data provided by S&P Global Market Intelligence. Shares gained ground following an encouraging earnings report that beat analysts' expectations.

TWTR Chart

TWTR data by YCharts.

So what

Twitter released earnings results on Feb. 8, which showed a return to sales growth and its first quarter of profitability. The results were paired with some encouraging guidance from management, and shares surged as a result of the improving outlook for the social media company.

A person using a mobile phone.

Image source: Getty Images.

While monthly active users grew just 4% year over year in the quarter ending in December, daily active users climbed 12%, indicating that the service's user base is becoming more engaged. Ad engagement climbed 75% compared to the prior-year period, reflecting increased user click-through rates and the benefits of shifting toward video-based advertisements.

Now what

While ad engagement saw a dramatic uptick, the cost to clients actually declined substantially -- down 42% year over year. If Twitter can continue to drive ad click-through while also keeping prices low for advertisers, the appeal of doing business on the platform will only continue to rise.

The company also sees a long-term growth opportunity in its data licensing and enterprise segment, and an 11% year-over-year sales increase in the fourth quarter combined with management's comments that a significant number of new deals have recently been signed shows momentum on that front. Twitter is making some commendable progress, but the stock's big run-up over the last year also makes it a riskier investment. Shares are valued at roughly 10 times forward sales, revenue is growing at a slow clip, and there's a limit to how much cost-cutting can be done at the company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.