3 Internet Stocks Moving The Industry Upward

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Internet Initiative Japan ( IIJI) was up $0.34 (3.1%) to $11.35 on light volume. Throughout the day, 2,086 shares of Internet Initiative Japan exchanged hands as compared to its average daily volume of 10,700 shares. The stock ranged in a price between $11.22-$11.35 after having opened the day at $11.22 as compared to the previous trading day's close of $11.01.

Internet Initiative Japan Inc., together with its subsidiaries, offers Internet connectivity, WAN, outsourcing, and systems integration services primarily in Japan. The company operates in two segments: Network Services and Systems Integration Business, and ATM Operation Business. Internet Initiative Japan has a market cap of $1.0 billion and is part of the services sector. Shares are down 17.6% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate Internet Initiative Japan a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Internet Initiative Japan as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from TheStreet Ratings analysis on IIJI go as follows:

  • IIJI's revenue growth trails the industry average of 21.3%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.30 is sturdy.
  • 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 47.4% when compared to the same quarter one year ago, falling from $10.16 million to $5.35 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. When compared to other companies in the Internet Software & Services industry and the overall market, INTERNET INITIATIVE JAPAN 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: Internet Initiative Japan Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

LookSmart ( LOOK) was another company that pushed the Internet industry higher today. LookSmart was up $0.30 (18.1%) to $1.96 on heavy volume. Throughout the day, 13,165 shares of LookSmart exchanged hands as compared to its average daily volume of 2,700 shares. The stock ranged in a price between $1.68-$2.00 after having opened the day at $1.68 as compared to the previous trading day's close of $1.66.

LookSmart, Ltd. provides search and display advertising network solutions in the United States, Europe, the Middle East, and Africa. LookSmart has a market cap of $7.0 million and is part of the services sector. Shares are down 19.0% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate LookSmart a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates LookSmart as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on LOOK go as follows:

  • LOOK's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.65%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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, LOOKSMART LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • LOOK, with its very weak revenue results, has greatly underperformed against the industry average of 21.3%. Since the same quarter one year prior, revenues plummeted by 64.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has slightly increased to -$1.26 million or 6.52% when compared to the same quarter last year. Despite an increase in cash flow, LOOKSMART LTD's cash flow growth rate is still lower than the industry average growth rate of 23.22%.
  • The gross profit margin for LOOKSMART LTD is rather high; currently it is at 55.73%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -129.71% is in-line with the industry average.

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

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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