The Four Best-Capitalized Internet Companies

Although the Dow managed to stage another rally Thursday, gloom and doom has definitely settled into the market sentiment. While the overall valuations in the stock market needed to drop, the panic selling of the last few days have brought some stocks down to almost ridiculously cheap prices.

We at eChristianInvesting took a look at the internet sector to see which companies have the strongest balance sheets to ride out this recession and hopefully emerge with greater market share. We excluded companies that aren't currently profitable, as well as any companies with any significant levels of debt on their balance sheet. That left four profitable companies who have no debt and plenty of cash on their balance sheets (compared to their market capitalization).

1. The Street (71% of Market Cap): The Street (TSCM) has seen their shares hammered in recent weeks, falling from $5.99 at the end of September to close at $3.72 today. That's a 38% drop in valuation in a little over 2 weeks. However, TSCM has over $80M on their balance sheet and are carrying no debt. That's $2.64 per share in cash! In addition, the company is profitable with analysts expecting the company to earn $.27 per share in 2008 and $.32 per share in 2009.

2. 51 Jobs (63% of Market Cap): The Chinese online recruitment company 51 Jobs (JOBS) saw their shares fall after posting disappointing second quarter results. That led to analysts slashing their estimates and the share pricing dropping over 40%. However, 51 Jobs continues to be the market leader in China and is expected to grow revenues by double digits next year. That combined with their $152M in cash has this company poised for a strong rebound.

3. The Nine Ltd. (78% of Market Cap): Chinese gaming company, The Nine Ltd. (NCTY), provides one of the safest bets within the internet sector. Their cash balance of over $300M represents 78% of their current share price. Meanwhile, analysts are expecting this company to continue its strong growth pattern with projections of over 20% profitable growth in 2009.

4. eHealthInsurance (45% of Market Cap): eHealthInsurance.com (EHTH) has been one of my favorite companies for a long time. Unfortunately, their high valuation made their shares unattractive until recently. The recent market panic has offered investors a wonderful opportunity to create a position in their shares. The company has an exceptionally strong balance sheet with a $136M in cash ($5.43 per share) and no debt. Health insurance is one of those areas which is considered to be reasonably recession proof.

Analysts are forecasting 19% growth in revenues next year with the consensus being that individuals will continue to purchase insurance policies despite the economy. In fact, high numbers of layoffs may even help this business as individuals have to look for insurance options outside of what their companies have traditionally provided.

Disclosure: Long TSCM

Comments

[chris_dress:]

what about tlab?

2008 Oct 17 01:34 PM

[Budget Man:]

Those companies look great. I think the one question to ask is how those sites get their traffic. I would worry that Ehealthinsurance, a site that many consumers would only use once in awhile, would be too reliant on search engines to drive their traffic.

On the other hand, TheStreet.com probably gets mostly repeat visitors, and it seems like a great buying opportunity.

2008 Oct 18 02:55 AM

[ebeng:]

Isnt EHTH at a disadvantage if Obama gets elected? Obama proposes to establish or expand the health insurance provided to congressmen and federal employees to the general public. So it would make co's business irrelevant, if everybody can get the relatively good health insurance.

2008 Oct 21 09:34 PM