Why Web.com Group (WWWW) Stock Is Plummeting Today

NEW YORK (TheStreet) -- Shares of Web.com Group, Inc. (WWWW) are tanking -21.97% to $27 in mid-morning trading on Tuesday.

The company is a global domain name registrar and its stock began to dive following Google's (GOOG) announcement that t has entered the domain registration industry through an invitation only beta website.

Google is working to create new domain names like .guru and .photography in order, as Google says,  "to help you find a meaningful address that stands out on the web."

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Separately, TheStreet Ratings team rates WEB.COM GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate WEB.COM GROUP INC (WWWW) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 101.03% and other important driving factors, this stock has surged by 48.94% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • WEB.COM GROUP INC 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WEB.COM GROUP INC continued to lose money by earning -$1.36 versus -$2.61 in the prior year. This year, the market expects an improvement in earnings ($2.55 versus -$1.36).
  • The gross profit margin for WEB.COM GROUP INC is rather high; currently it is at 65.19%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, WWWW's net profit margin of 0.36% significantly trails the industry average.
  • 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, WEB.COM GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 3.21 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.12, which clearly demonstrates the inability to cover short-term cash needs.
  • You can view the full analysis from the report here: WWWW Ratings Report
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