Are you a value investor looking to add internet companies to your 2013 portfolio? If so, this screen might interest you.
We screened for internet 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 internet stocks look attractive? Use this list as a starting point for your own analysis.
1. IAC/InterActiveCorp. (IACI): Engages in the Internet business in the United States and internationally. Market cap at $3.69B, most recent closing price at $41.71. Levered free cash flow at $329.65M vs. enterprise value at $3.14B (implies a LFCF/EV ratio at 10.5%).
2. Yahoo! Inc. (YHOO): Operates as a digital media company that delivers personalized digital content and experiences, across devices and worldwide. Market cap at $23.68B, most recent closing price at $20.02. Levered free cash flow at $3.19B vs. enterprise value at $15.30B (implies a LFCF/EV ratio at 20.85%).
3. Digital River Inc. (NASDAQ:DRIV-OLD): Provides outsourced e-commerce solutions worldwide. Market cap at $504.53M, most recent closing price at $14.20. Levered free cash flow at $33.29M vs. enterprise value at $142.93M (implies a LFCF/EV ratio at 23.29%).
4. Vocus Inc. (NASDAQ:VOCS): Provides cloud-based PR and marketing software products for public relations management in the United States, Europe, Asia, and Morocco. Market cap at $340.31M, most recent closing price at $16.44. Levered free cash flow at $33.15M vs. enterprise value at $293.11M (implies a LFCF/EV ratio at 11.31%).
*FCF data sourced from Yahoo! Finance
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.