What happened

After seeing advertising stock Pubmatic pummeled on a strong earnings beat (but modest sales miss) earlier this week, investors in its larger rival Integral Ad Science (IAS 1.88%) probably weren't feeling too optimistic heading into the latter's fourth-quarter earnings report last night.

But not to worry. Integral Ad Science stock is doing just fine. In fact, the advertising technology stock is up a strong 9.2% as of 11:30 a.m. ET Friday.

So what

Why is IAS faring better than its smaller competitor? Mainly because it didn't make the mistake of mixing a "bad" sales report with a "good" earnings report. Beating on both the top and bottom lines, IAS reported a $0.07 per share profit on sales of $117.4 million last night, where Street analysts were only looking for a $0.01 profit on sales of $111.2 million.    

IAS accomplished this feat by growing sales 15% year over year -- with "all business lines" reporting growth, but programmatic revenue growing fastest (up 30% for the quarter). IAS then earned itself a 10% net margin on its greater sales, and therefore flipped from a loss in last year's Q4 to a profit this year.

Now what

And this good news looks likely to continue in the new year. Commenting that Q4 set the company up for "a solid start to 2023," CEO Lisa Utzschneider predicted that sales will grow about 15% or 16% in the first quarter, to $103 million (better than the $96 million that Wall Street is looking for). For the full year, management forecasts sales between $453 million and $463 million -- basically in line with analyst expectations for $459 million.

Management did not give a prediction for profits, but Wall Street is optimistic that growth there could be even better than the sales number. Q1 earnings are only expected to be about $0.01 currently, but if sales exceed that estimate, it stands to reason that IAS will beat on earnings next quarter as well. Furthermore, Wall Street sees IAS earning $0.15 per share through the end of the year. If IAS can hit that target, it will work out to 50% earnings growth in 2023.

Granted, even hitting this number would leave IAS stock selling for more than 78 times current year earnings, which seems pretty pricey. So long as the company keeps its growth rate up, however, that's a valuation that investors may be willing to forgive.