3 Stocks Pushing The Internet Industry Lower

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 Internet industry as a whole closed the day down 0.2% versus the S&P 500, which was down 0.7%. Laggards within the Internet industry included Professional Diversity Network ( IPDN), down 2.6%, Selectica ( SLTC), down 2.8%, Local ( LOCM), down 2.7%, TheStreet ( TST), down 4.1% and Global Sources ( GSOL), down 4.0%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

Local ( LOCM) is one of the companies that pushed the Internet industry lower today. Local was down $0.03 (2.7%) to $1.02 on heavy volume. Throughout the day, 162,711 shares of Local exchanged hands as compared to its average daily volume of 53,200 shares. The stock ranged in price between $1.00-$1.05 after having opened the day at $1.03 as compared to the previous trading day's close of $1.05.

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 $23.9 million and is part of the technology sector. Shares are down 33.5% year-to-date as of the close of trading on Tuesday. Currently there are 3 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 disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from TheStreet Ratings analysis on LOCM go as follows:

  • 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, LOCAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for LOCAL CORP is currently lower than what is desirable, coming in at 25.57%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.21% is significantly below that of the industry average.
  • LOCM'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 28.13%, 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.
  • Despite currently having a low debt-to-equity ratio of 0.60, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that LOCM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.51 is low and demonstrates weak liquidity.
  • The revenue fell significantly faster than the industry average of 28.8%. Since the same quarter one year prior, revenues fell by 22.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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

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At the close, Selectica ( SLTC) was down $0.15 (2.8%) to $5.17 on light volume. Throughout the day, 598 shares of Selectica exchanged hands as compared to its average daily volume of 5,400 shares. The stock ranged in price between $5.17-$5.24 after having opened the day at $5.24 as compared to the previous trading day's close of $5.32.

Selectica, Inc. provides cloud-based software solutions for companies in the United States, Canada, India, New Zealand, Switzerland, and the United Kingdom. Selectica has a market cap of $42.2 million and is part of the technology sector. Shares are down 17.0% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Selectica a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Selectica as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from TheStreet Ratings analysis on SLTC 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 479.8% when compared to the same quarter one year ago, falling from -$0.47 million to -$2.70 million.
  • Net operating cash flow has significantly decreased to -$4.40 million or 58.19% 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 SELECTICA INC has not done very well: it is down 15.24% 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.
  • SELECTICA INC 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SELECTICA INC reported poor results of -$3.10 versus -$1.67 in the prior year. This year, the market expects an improvement in earnings (-$1.24 versus -$3.10).
  • 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, SELECTICA INC's return on equity significantly trails that of both the industry average and the S&P 500.

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

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Professional Diversity Network ( IPDN) was another company that pushed the Internet industry lower today. Professional Diversity Network was down $0.12 (2.6%) to $4.38 on light volume. Throughout the day, 2,000 shares of Professional Diversity Network exchanged hands as compared to its average daily volume of 5,500 shares. The stock ranged in price between $4.35-$4.38 after having opened the day at $4.38 as compared to the previous trading day's close of $4.50.

Professional Diversity Network, Inc. operates online professional networking communities with career resources in the United States. Professional Diversity Network has a market cap of $61.5 million and is part of the technology sector. Shares are down 2.4% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Professional Diversity Network a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Professional Diversity Network as a hold. 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 feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

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Highlights from TheStreet Ratings analysis on IPDN go as follows:

  • IPDN's very impressive revenue growth greatly exceeded the industry average of 28.8%. Since the same quarter one year prior, revenues leaped by 60.9%. 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.
  • IPDN's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that IPDN's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for PROFESSIONAL DIVERSITY NETWK is currently very high, coming in at 75.37%. Regardless of IPDN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IPDN's net profit margin of -59.74% significantly underperformed when compared to the industry average.
  • 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, PROFESSIONAL DIVERSITY NETWK'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 -$2.80 million or 679.10% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: Professional Diversity Network 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.

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