LinkedIn Corp Stock Sell Recommendation Reiterated (LNKD)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- LinkedIn (NYSE: LNKD) has been reiterated by TheStreet Ratings as a sell with a ratings score of D+ . The area that we feel has been the company's primary weakness has been its disappointing return on equity.

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Highlights from the ratings report include:
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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.
  • This stock has increased by 89.58% 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.
  • The gross profit margin for LINKEDIN CORP is currently very high, coming in at 88.10%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, LNKD's net profit margin of 3.79% significantly trails the industry average.
  • LNKD 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. To add to this, LNKD has a quick ratio of 2.29, which demonstrates the ability of the company to cover short-term liquidity needs.
  • LINKEDIN CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LINKEDIN CORP increased its bottom line by earning $0.19 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $0.19).

LinkedIn Corporation operates an online professional network. LinkedIn has a market cap of $14.09 billion and is part of the technology sector and internet industry. The company has a P/E ratio of 828.2, above the S&P 500 P/E ratio of 17.7. Shares are up 37% year to date as of the close of trading on Friday.

You can view the full LinkedIn Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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