The Trade Desk (TTD 0.04%) recently released its report for the first quarter of 2023, and its business has continued to show improvement. This has led to an increasing stock price, rising 65% from its 52-week low in November.

However, that recent surge has also made it a more expensive stock at a time when digital advertising spending has slowed. This calls into question whether investors can still buy the software-as-a-service (SaaS) stock at a reasonable price or if they should write it off as a missed opportunity.

The Q1 earnings report

In the first quarter, The Trade Desk reported $383 million in revenue, a 21% increase from the same quarter in 2022. As mentioned before, the ad industry has dealt with a slump in ad spending, and the drop-off from its 32% revenue growth rate in 2022 shows that slowdown. Still, the transition from traditional to connected televisions has moved much of the ad spend to the digital space, which mitigates the company's slowing revenue growth.

Moreover, quarterly net income came in at $9 million, up from a loss of $15 million in the year-ago quarter. With the company still claiming $113 million in stock-based compensation, operating losses rose slightly during the period. Nonetheless, higher interest income and an income tax benefit helped it turn profitable.

Also, according to the company, investors should expect more of the same in the second quarter. The $452 million in forecast revenue would amount to a 20% yearly increase. It also expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $160 million, 15% more than in Q2 2022 and up sequentially from the $109 million in Q1.

Where the report leaves investors

Due to these results, The Trade Desk stock fell by more than 3% in the following trading session. But given the aforementioned 65% increase from the 52-week low, that drop may not placate investors who missed the opportunity to buy at a much lower price.

Furthermore, the valuation might present a challenge to investors. Its price-to-sales (P/S) ratio now stands at 20. That is up from as low as 13 in January, and it often dropped below 16 over the last year. Hence, investors might refrain from buying more stock at its current valuation.

However, it also offers a compelling business model that is arguably worth its price. It continues to draw increased interest with its demand-side digital ad platform, allowing advertisers and agencies the ability to manage their ad campaigns.

The company's ecosystem also brings consumers and publishers together, helping advertisers reach target audiences and measure an ad's performance. And thanks to its Galileo software and its Unified ID 2.0, this process protects consumer privacy, which could eventually eliminate the need for third-party cookies.

Investors should also remember the digital ad market's potential. Dentsu forecasts an 8% growth rate for the digital ad market, putting the Trade Desk well ahead of industry growth averages. Additionally, digital ad spending claimed 55% of the market in 2022, a number expected to grow to 58% by 2024. Such increases should bode well for the company's future.

Should I consider The Trade Desk?

Given current market conditions, The Trade Desk stock looks like a long-term buy, though investors should probably wait for a pullback. The stock has risen significantly as the ad market and company revenue have experienced a slowdown. Moreover, investors have become less tolerant of expensive stocks after the dramatic sell-off in tech stocks in 2022. That could limit its near-term growth.

Nonetheless, The Trade Desk continues to book higher-than-average revenue growth. And even as the industry struggles, advertisers continue to move more advertising to the digital space, indicating that the demand for the company's platform will continue to increase over time. If it falls to under 16 times sales, investors should consider adding shares.