Interested in the high-growth prospects of the internet information industry? We ran a screen to dig deeper into these stocks.
We screened the internet information industry for stocks that appear undervalued relative to their cash flows, indicated by high ratios of levered free cash flow/enterprise value.
Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. When companies have ratios of levered free cash flow/enterprise value in excess of 10%, it may indicate that the company as a whole is being undervalued.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks are being undervalued? Use this list as a starting point for your own analysis.
List sorted by LFCF/EV.
1. AOL, Inc. (AOL): Operates as a Web services company that offers a suite of brands and offerings for the worldwide audience. Market cap at $2.95B, most recent closing price at $32.45. Levered free cash flow at $392.27M vs. enterprise value at $1.60B (implies a LFCF/EV ratio at 24.52%).
2. Sohu.com Inc. (SOHU): Engages in the brand advertising, online gaming, sponsored search, and wireless businesses in China. Market cap at $1.33B, most recent closing price at $35.81. Levered free cash flow at $90.25M vs. enterprise value at $495.01M (implies a LFCF/EV ratio at 18.23%).
3. TechTarget, Inc. (TTGT): Provides specialized online content that brings together the buyers and sellers of corporate information technology (IT) products. Market cap at $164.09M, most recent closing price at $4.27. Levered free cash flow at $11.96M vs. enterprise value at $110.62M (implies a LFCF/EV ratio at 10.81%).
*LFCF/EV data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.