3 Internet Stocks Pushing Industry Growth

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.

Two out of the three major indices traded up today One out of the three major indices traded up today The three major indices are trading lower today with the Dow Jones Industrial Average ( ^DJI) trading down 19.71 points (-0.1%) at 17,049 as of Thursday, Sept. 11, 2014, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,733 issues advancing vs. 1,330 declining with 151 unchanged.

The Internet industry as a whole was unchanged today versus the S&P 500, which was up 0.1%. Top gainers within the Internet industry included LookSmart ( LOOK), up 2.0%, Local ( LOCM), up 3.1%, Sify Technologies ( SIFY), up 2.0%, Rediff.com India ( REDF), up 2.3% and TechTarget ( TTGT), up 2.2%.

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

Sify Technologies ( SIFY) is one of the companies that pushed the Internet industry higher today. Sify Technologies was up $0.04 (2.0%) to $2.07 on light volume. Throughout the day, 26,945 shares of Sify Technologies exchanged hands as compared to its average daily volume of 186,200 shares. The stock ranged in a price between $2.03-$2.07 after having opened the day at $2.03 as compared to the previous trading day's close of $2.03.

Sify Technologies Limited provides integrated information and communications technology solutions and services in India. Sify Technologies has a market cap of $369.6 million and is part of the technology sector. Shares are down 4.2% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate Sify Technologies 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 Sify Technologies as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share and deteriorating net income.

Highlights from TheStreet Ratings analysis on SIFY go as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 11.7%. 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.
  • 40.13% is the gross profit margin for SIFY TECHNOLOGIES LTD -ADR which we consider to be strong. Regardless of SIFY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SIFY's net profit margin of 3.81% is significantly lower than the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • SIFY TECHNOLOGIES LTD -ADR's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, SIFY TECHNOLOGIES LTD -ADR reported lower earnings of $0.04 versus $0.06 in the prior year.
  • 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 31.3% when compared to the same quarter one year ago, falling from $2.74 million to $1.88 million.

You can view the full analysis from the report here: Sify Technologies 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, Local ( LOCM) was up $0.06 (3.1%) to $2.01 on heavy volume. Throughout the day, 438,549 shares of Local exchanged hands as compared to its average daily volume of 85,300 shares. The stock ranged in a price between $1.95-$2.07 after having opened the day at $1.97 as compared to the previous trading day's close of $1.95.

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 $43.4 million and is part of the technology sector. Shares are up 23.4% year-to-date as of the close of trading on Wednesday. Currently there are 2 analysts who rate Local 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 Local as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

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 30.76%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.90% is significantly below that of the industry average.
  • 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, LOCAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • LOCM, with its decline in revenue, underperformed when compared the industry average of 19.9%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • LOCM's debt-to-equity ratio of 0.82 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 0.75 is weak.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.

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.

LookSmart ( LOOK) was another company that pushed the Internet industry higher today. LookSmart was up $0.03 (2.0%) to $1.53 on light volume. Throughout the day, 4,943 shares of LookSmart exchanged hands as compared to its average daily volume of 15,800 shares. The stock ranged in a price between $1.51-$1.53 after having opened the day at $1.52 as compared to the previous trading day's close of $1.50.

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 $8.8 million and is part of the technology sector. Shares are down 25.9% year-to-date as of the close of trading on Wednesday. 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. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on LOOK go as follows:

  • 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 83.7% when compared to the same quarter one year ago, falling from -$1.01 million to -$1.86 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness 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.
  • Net operating cash flow has significantly decreased to -$1.06 million or 69.77% 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 share price of LOOKSMART LTD has not done very well: it is down 22.72% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • LOOKSMART LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, LOOKSMART LTD continued to lose money by earning -$0.93 versus -$1.92 in the prior year.

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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