How Will LinkedIn (LNKD) Stock React To Labor Department Settlement?

NEW YORK (TheStreet) -- LinkedIn (LNKD) agreed to pay $6 million in overtime and damages to 359 current and former employees after a Labor Department settlement found that the company violated the U.S. wage law, Reuters reports.

The Labor Department announced today that LinkedIn will pay more than $3.3 million in retroactive overtime wages and more than $2.5 million in damages to workers in California, Illinois, Nebraska and New York. 

The investigation revealed that the social network for professionals failed to record and compensate workers for all hours worked, violating provisions of the Fair Labor Standards Act, Reuters said. 

LinkedIn shares are up 0.98% to $204.49.

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TheStreet Ratings team rates LINKEDIN CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate LINKEDIN CORP (LNKD) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."

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

  • The revenue growth greatly exceeded the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 46.8%. 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.
  • 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. Along with this, the company maintains a quick ratio of 3.69, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has slightly increased to $128.44 million or 3.43% when compared to the same quarter last year. Despite an increase in cash flow, LINKEDIN CORP's cash flow growth rate is still lower than the industry average growth rate of 17.70%.
  • 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 127.7% when compared to the same quarter one year ago, falling from $3.73 million to -$1.03 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.

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