Akamai Technologies Inc (AKAM, Financial) recently reported a daily gain of 3.43%, yet it has experienced a 3-month decline of 24.62%. With an Earnings Per Share (EPS) of 4.02, investors are prompted to question: Is the stock modestly undervalued? This analysis delves into Akamai Technologies' current market valuation to uncover whether it's an investment worthy of consideration.
Company Overview
Akamai Technologies operates a robust content delivery network (CDN), enhancing the speed, security, and quality with which its customers can deliver content to their own clients. The company's expansive network includes over 325,000 servers across more than 1,000 cities worldwide. Beyond its traditional CDN services, Akamai has expanded into security and cloud services, which have become significant aspects of its business. With a market cap of $14.40 billion and a current stock price of $94.32, compared to a GF Value of $112.95, there's an indication that the stock might be trading at a discount.
Understanding GF Value
The GF Value is a proprietary measure calculated to represent the intrinsic value of a stock. This valuation considers historical trading multiples, an adjustment factor based on past returns and growth, and estimated future business performance. According to this metric, Akamai Technologies (AKAM, Financial) appears modestly undervalued. This suggests that the stock might offer a favorable long-term return potential relative to its current market price.
Financial Strength and Stability
Investing in companies with robust financial strength reduces the risk of significant capital loss. Akamai Technologies' cash-to-debt ratio of 0.37, although lower than many of its industry peers, still supports a GuruFocus financial strength rating of 6 out of 10. This suggests that while there are risks, the company maintains a fair level of financial health.
Profitability and Growth Prospects
Akamai Technologies has consistently demonstrated profitability, with an impressive operating margin of 17.88% that surpasses 86.73% of its competitors in the software industry. However, its growth metrics show mixed signals. The company's 3-year average annual revenue growth rate stands at 8.2%, which is moderate relative to industry standards. This level of growth, coupled with a strong profitability profile, suggests that while Akamai is not the fastest growing company, it maintains a solid foundation for steady earnings.
Investment Considerations
When comparing return on invested capital (ROIC) to the weighted average cost of capital (WACC), Akamai shows a slight edge, indicating it is creating value for shareholders. This financial metric, along with the company's modest undervaluation as per GF Value, positions Akamai Technologies as a potentially attractive investment.
Conclusion
In summary, Akamai Technologies (AKAM, Financial) presents itself as a modestly undervalued opportunity within the market. With solid financial health, consistent profitability, and a reasonable growth trajectory, the company merits consideration from investors looking for stable returns. For a deeper dive into Akamai Technologies' financials, visit their 30-Year Financials here.
To discover other high-quality companies that may deliver above-average returns, check out the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
