3 Internet Stocks Driving The Industry Higher

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The three major indices are trading lower today with the Dow Jones Industrial Average ( ^DJI) trading up 20 points (0.1%) at 16,715 as of Tuesday, May 13, 2014, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,363 issues advancing vs. 1,697 declining with 123 unchanged.

The Internet industry as a whole closed the day down 0.1% versus the S&P 500, which was unchanged. Top gainers within the Internet industry included LookSmart ( LOOK), up 18.1%, Net Element ( NETE), up 13.2%, Internet Initiative Japan ( IIJI), up 3.1%, Local ( LOCM), up 2.3% and Sify Technologies ( SIFY), up 1.9%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Local ( LOCM) is one of the companies that pushed the Internet industry higher today. Local was up $0.04 (2.3%) to $1.79 on light volume. Throughout the day, 45,722 shares of Local exchanged hands as compared to its average daily volume of 126,500 shares. The stock ranged in a price between $1.73-$1.82 after having opened the day at $1.75 as compared to the previous trading day's close of $1.75.

Local Corporation, a technology and advertising company, provides search results to consumers who search online for local businesses, products, and services in the United States. The company operates in two segments, Paid Search and Daily Deals. Local has a market cap of $41.1 million and is part of the services sector. Shares are up 10.8% year-to-date as of the close of trading on Monday. Currently there are 2 analysts who rate Local a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Local as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and weak operating cash flow.

Highlights from TheStreet Ratings analysis on LOCM go as follows:

  • The gross profit margin for LOCAL CORP is currently lower than what is desirable, coming in at 25.42%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -10.80% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$0.73 million or 168.77% 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 Internet Software & Services industry and the overall market, LOCAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, LOCM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • LOCM's debt-to-equity ratio of 0.79 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.80 is weak.

You can view the full analysis from the report here: Local Ratings Report

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