NEW YORK (TheStreet) -- Zynga ( (ZNGA - Get Report)), LinkedIn (LNKD - Get Report) and Facebook (FB - Get Report) have all seen high double-digit gains this year, but which have true value and which are overvalued?
Year to date, Zynga is up 63.6%, LinkedIn has added 90.7% and Facebook has climbed 82.1%, each easily exceeding the S&P 500's 25.37% gain.
By early afternoon Thursday, Zynga had gained 1.3% to $3.86, LinkedIn had shed 0.81% to $218.98 and Facebook dropped 0.52% to $48.46.
ZyngaTheStreet Ratings team reiterates Zynga as a Sell with a ratings score of D. The team has this to say about its recommendation: "We rate Zynga Inc (ZNGA) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been weak operating cash flow." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly decreased to -$4.86 million or 116.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, Zynga Inc's return on equity significantly trails that of both the industry average and the S&P 500.
- The revenue fell significantly faster than the industry average of 7.1%. Since the same quarter one year prior, revenues fell by 36%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for Zynga Inc is currently very high, coming in at 87.65%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.03% is in-line with the industry average.
- ZNGA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.77, which clearly demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: ZNGA Ratings Report
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 246.1% when compared to the same quarter one year ago, falling from $2.3 million to -$3.36 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, LinkedIn Corp's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for LinkedIn Corp is currently very high, coming in at 86.41%. Regardless of LNKD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LNKD's net profit margin of -0.85% significantly underperformed when compared to the industry average.
- Compared to its closing price of one year ago, LNKD's share price has jumped by 108.94%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- LinkedIn Corp has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LinkedIn Corp increased its bottom line by earning 19 cents a share vs. 11 cents in the prior year. This year, the market expects an improvement in earnings ($1.61 vs. 19 cents).
- You can view the full analysis from the report here: LNKD Ratings Report
- FB's very impressive revenue growth greatly exceeded the industry average of 9.4%. Since the same quarter one year prior, revenues leaped by 59.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- FB's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 10.37, which clearly demonstrates the ability to cover short-term cash needs.
- Powered by its strong earnings growth of 950% and other important driving factors, this stock has surged by 132.34% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- When compared to other companies in the Internet Software & Services industry and the overall market, Facebook Inc's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: FB Ratings Report
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