Akamai Technologies Inc Valuation – February 2019 $AKAM

Company Profile (excerpt from Reuters): Akamai Technologies, Inc., incorporated on August 20, 1998, is engaged in providing cloud services for delivering, optimizing and securing content and business applications over the Internet. As of December 31, 2016, the Company’s globally-distributed platform included more than 200,000 servers in over 1,600 networks in 131 countries. It is involved in offering content delivery network (CDN) services. Its services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions, and enterprise professional services. The Company’s solutions include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,398,590,049 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.09 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 122.01% Pass
6. Moderate PEmg Ratio PEmg < 20 29.64 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.09 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.66 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.36
MG Growth Estimate 6.75%
MG Value $51.89
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $34.20
MG Value based on 0% Growth $20.05
Market Implied Growth Rate 10.57%
Current Price $69.90
% of Intrinsic Value 134.71%

Akamai Technologies, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.63 in 2015 to an estimated $2.36 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.57% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Akamai Technologies, Inc. revealed the company was trading above its Graham Number of $41.15. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.64, which was below the industry average of 56.55, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.61.

Akamai Technologies, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.61
Graham Number $41.15
PEmg 29.64
Current Ratio 2.09
PB Ratio 3.60
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,535,354,000
Total Current Liabilities $1,210,709,000
Long-Term Debt $874,080,000
Total Assets $5,461,770,000
Intangible Assets $1,655,752,000
Total Liabilities $2,269,910,000
Shares Outstanding (Diluted Average) 164,540,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.84
Dec2018 $1.76
Dec2017 $1.26
Dec2016 $1.79
Dec2015 $1.78
Dec2014 $1.84
Dec2013 $1.61
Dec2012 $1.12
Dec2011 $1.07
Dec2010 $0.90
Dec2009 $0.78
Dec2008 $0.79
Dec2007 $0.56
Dec2006 $0.34
Dec2005 $2.11
Dec2004 $0.25
Dec2003 -$0.25
Dec2002 -$1.81
Dec2001 -$23.59
Dec2000 -$10.07
Dec1999 -$1.98

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.36
Dec2018 $1.64
Dec2017 $1.61
Dec2016 $1.73
Dec2015 $1.63
Dec2014 $1.47
Dec2013 $1.22
Dec2012 $1.00
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.77
Dec2008 $0.78
Dec2007 $0.72
Dec2006 $0.57
Dec2005 -$1.09
Dec2004 -$4.16
Dec2003 -$6.76

Recommended Reading:

Other ModernGraham posts about the company

Akamai Technologies Inc Valuation – May 2018 $AKAM
Akamai Technologies Inc Valuation – January 2017 $AKAM
15 Best Undervalued Stocks of the Week – 8/20/16
Akamai Technologies Inc Valuation – August 2016 $AKAM
18 Best Stocks For Value Investors This Week – 1/30/16

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Adobe Inc Valuation – February 2019 $ADBE
Autodesk Inc Valuation – February 2019 $ADSK
F5 Networks Inc Valuation – February 2019 $FFIV
Cadence Design Systems Inc Valuation – January 2019 $CDNS
Oracle Corporation Valuation – January 2019 $ORCL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Akamai Technologies Inc Valuation – May 2018 $AKAM

Company Profile (excerpt from Reuters): Akamai Technologies, Inc., incorporated on August 20, 1998, is engaged in providing cloud services for delivering, optimizing and securing content and business applications over the Internet. As of December 31, 2016, the Company’s globally-distributed platform included more than 200,000 servers in over 1,600 networks in 131 countries. It is involved in offering content delivery network (CDN) services. Its services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions, and enterprise professional services. The Company’s solutions include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions.

AKAM Chart

AKAM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,278,244,575 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.29 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 127.27% Pass
6. Moderate PEmg Ratio PEmg < 20 33.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.66 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.29 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.12
MG Growth Estimate 6.65%
MG Value $46.23
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $30.75
MG Value based on 0% Growth $18.03
Market Implied Growth Rate 12.73%
Current Price $72.01
% of Intrinsic Value 155.77%

Akamai Technologies, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the low current ratio, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.47 in 2014 to an estimated $2.12 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.73% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Akamai Technologies, Inc. revealed the company was trading above its Graham Number of $37.45. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 33.96, which was below the industry average of 45.26, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $0.92.

Akamai Technologies, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $0.92
Graham Number $37.45
PEmg 33.96
Current Ratio 1.29
PB Ratio 3.66
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $1,459,726,000
Total Current Liabilities $1,130,595,000
Long-Term Debt $0
Total Assets $4,686,904,000
Intangible Assets $1,692,134,000
Total Liabilities $1,300,647,000
Shares Outstanding (Diluted Average) 172,004,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.20
Dec2017 $1.26
Dec2016 $1.79
Dec2015 $1.78
Dec2014 $1.84
Dec2013 $1.61
Dec2012 $1.12
Dec2011 $1.07
Dec2010 $0.90
Dec2009 $0.78
Dec2008 $0.79
Dec2007 $0.56
Dec2006 $0.34
Dec2005 $2.11
Dec2004 $0.25
Dec2003 -$0.25
Dec2002 -$1.81
Dec2001 -$23.59
Dec2000 -$10.07
Dec1999 -$1.98
Dec1998 -$0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.12
Dec2017 $1.61
Dec2016 $1.73
Dec2015 $1.63
Dec2014 $1.47
Dec2013 $1.22
Dec2012 $1.00
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.77
Dec2008 $0.78
Dec2007 $0.72
Dec2006 $0.57
Dec2005 -$1.09
Dec2004 -$4.16
Dec2003 -$6.76
Dec2002 -$9.18

Recommended Reading:

Other ModernGraham posts about the company

Akamai Technologies Inc Valuation – January 2017 $AKAM
15 Best Undervalued Stocks of the Week – 8/20/16
Akamai Technologies Inc Valuation – August 2016 $AKAM
18 Best Stocks For Value Investors This Week – 1/30/16
Akamai Technologies Inc Valuation – January 2016 $AKAM

Other ModernGraham posts about related companies

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Adobe Systems Inc Valuation – April 2018 $ADBE
Synopsys Inc Valuation – April 2018 $SNPS
Autodesk Inc Valuation – April 2018 $ADSK
F5 Networks Inc Valuation – April 2018 $FFIV
Cadence Design Systems Inc Valuation – Initial Coverage $CDNS
Oracle Corporation Valuation – March 2018 $ORCL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Akamai Technologies Inc Valuation – January 2017 $AKAM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Akamai Technologies Inc (AKAM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Akamai Technologies, Inc. is engaged in providing cloud services for delivering, optimizing and securing content and business applications over the Internet. The Company’s across the globe distributed platform comprises approximately 200,000 servers in over 1,400 networks in over 120 countries. It is involved in offering content delivery network (CDN) services. Its services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions, and enterprise professional services. Its solutions include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions. Performance and Security Solutions are designed to help Websites and business applications operate while offering protection against security threats. Media Delivery Solutions are designed to enable enterprises to execute their digital media distribution strategies. Service and Support Solutions offer professional services and solutions.

AKAM Chart

AKAM data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,136,335,647 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.21 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 160.09% Pass
6. Moderate PEmg Ratio PEmg < 20 39.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.87 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.21 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.66 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.77
MG Growth Estimate 11.70%
MG Value $56.54
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $25.69
MG Value based on 0% Growth $15.06
Market Implied Growth Rate 15.44%
Current Price $69.79
% of Intrinsic Value 123.43%

Akamai Technologies, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1 in 2012 to an estimated $1.77 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Akamai Technologies, Inc. revealed the company was trading above its Graham Number of $28.08. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 39.38, which was above the industry average of 38.13. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.15.

Akamai Technologies, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $1.15
Graham Number $28.08
PEmg 39.38
Current Ratio 3.21
PB Ratio 3.87
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $1,386,964,000
Total Current Liabilities $431,536,000
Long-Term Debt $634,504,000
Total Assets $4,353,635,000
Intangible Assets $1,290,086,000
Total Liabilities $1,184,704,000
Shares Outstanding (Diluted Average) 175,617,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.92
Dec2015 $1.78
Dec2014 $1.84
Dec2013 $1.61
Dec2012 $1.12
Dec2011 $1.07
Dec2010 $0.90
Dec2009 $0.78
Dec2008 $0.79
Dec2007 $0.56
Dec2006 $0.34
Dec2005 $2.11
Dec2004 $0.25
Dec2003 -$0.25
Dec2002 -$1.81
Dec2001 -$23.59
Dec2000 -$10.07
Dec1999 -$1.98
Dec1998 -$0.05

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.77
Dec2015 $1.63
Dec2014 $1.47
Dec2013 $1.22
Dec2012 $1.00
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.77
Dec2008 $0.78
Dec2007 $0.72
Dec2006 $0.57
Dec2005 -$1.09
Dec2004 -$4.16
Dec2003 -$6.76
Dec2002 -$9.18
Dec2001 -$10.95
Dec2000 -$3.90

Recommended Reading:

Other ModernGraham posts about the company

18 Best Stocks For Value Investors This Week – 1/30/16
Akamai Technologies Inc Valuation – January 2016 $AKAM
Akamai Technologies Inc. Analysis – August 2015 Update $AKAM
Akamai Technology Stock Analysis – May 2015 Quarterly Update $AKAM
28 Companies in the Spotlight This Week – 2/28/15

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Motorola Solutions Inc Valuation – December 2016 $MSI
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Acxiom Corporation Valuation – November 2016 $ACXM
ACI Worldwide Inc Valuation – November 2016 $ACIW
Equinix Inc Valuation – August 2016 $EQIX
Qualcomm Inc Valuation – August 2016 $QCOM
Verisign Inc Valuation – August 2016 $VRSN
Akamai Technologies Inc Valuation – August 2016 $AKAM
Motorola Solutions Inc Valuation – August 2016 $MSI
F5 Networks Inc Valuation – July 2016 $FFIV

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Akamai Technologies Inc Valuation – August 2016 $AKAM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Akamai Technologies Inc (AKAM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Akamai Technologies, Inc. is engaged in providing cloud services for delivering, optimizing and securing content and business applications over the Internet. The Company’s across the globe distributed platform comprises approximately 200,000 servers in over 1,400 networks in over 120 countries. It is involved in offering content delivery network (CDN) services. Its services include the delivery of content, applications and software over the Internet, as well as mobile and security solutions, and enterprise professional services. Its solutions include Performance and Security Solutions, Media Delivery Solutions, and Service and Support Solutions. Performance and Security Solutions are designed to help Websites and business applications operate while offering protection against security threats. Media Delivery Solutions are designed to enable enterprises to execute their digital media distribution strategies. Service and Support Solutions offer professional services and solutions.

AKAM Chart

AKAM data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,179,341,733 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.63 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 164.79% Pass
6. Moderate PEmg Ratio PEmg < 20 28.79 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.91 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.64 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AKAM value chart August 2016

EPSmg $1.81
MG Growth Estimate 12.21%
MG Value $59.42
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $26.18
MG Value based on 0% Growth $15.35
Market Implied Growth Rate 10.14%
Current Price $51.97
% of Intrinsic Value 87.46%

Akamai Technologies, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1 in 2012 to an estimated $1.81 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 10.14% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Akamai Technologies, Inc. revealed the company was trading above its Graham Number of $28.56. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 28.79, which was below the industry average of 35.13, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.4.

Akamai Technologies, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

AKAM charts August 2016

Net Current Asset Value (NCAV) $1.40
Graham Number $28.56
PEmg 28.79
Current Ratio 3.63
PB Ratio 2.91
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Total Current Assets $1,365,584,000
Total Current Liabilities $376,542,000
Long-Term Debt $628,970,000
Total Assets $4,269,722,000
Intangible Assets $1,292,805,000
Total Liabilities $1,119,249,000
Shares Outstanding (Diluted Average) 176,420,000

Earnings Per Share History

Next Fiscal Year Estimate $2.02
Dec2015 $1.78
Dec2014 $1.84
Dec2013 $1.61
Dec2012 $1.12
Dec2011 $1.07
Dec2010 $0.90
Dec2009 $0.78
Dec2008 $0.79
Dec2007 $0.56
Dec2006 $0.34
Dec2005 $2.11
Dec2004 $0.25
Dec2003 -$0.25
Dec2002 -$1.81
Dec2001 -$23.59
Dec2000 -$10.07
Dec1999 -$1.98
Dec1998 -$0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.81
Dec2015 $1.63
Dec2014 $1.47
Dec2013 $1.22
Dec2012 $1.00
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.77
Dec2008 $0.78
Dec2007 $0.72
Dec2006 $0.57
Dec2005 -$1.09
Dec2004 -$4.16
Dec2003 -$6.76
Dec2002 -$9.18
Dec2001 -$10.95
Dec2000 -$3.90

Recommended Reading:

Other ModernGraham posts about the company

18 Best Stocks For Value Investors This Week – 1/30/16
Akamai Technologies Inc Valuation – January 2016 $AKAM
Akamai Technologies Inc. Analysis – August 2015 Update $AKAM
Akamai Technologies Inc. Analysis – August 2015 Update $AKAM
Akamai Technology Stock Analysis – May 2015 Quarterly Update $AKAM

Other ModernGraham posts about related companies

Motorola Solutions Inc Valuation – August 2016 $MSI
F5 Networks Inc Valuation – July 2016 $FFIV
Computer Sciences Corp Valuation – July 2016 $CSC
Infosys Ltd Valuation – July 2016 $INFY
Cognizant Technology Solutions Corp Valuation – July 2016 $CTSH
Total System Services Inc Valuation – May 2016 $TSS
Qualcomm Inc Valuation – February 2016 $QCOM
Motorola Solutions Inc Valuation – February 2016 Update $MSI
Cognizant Technology Solutions Corp Valuation – January 2016 Update $CTSH
Akamai Technologies Inc Valuation – January 2016 $AKAM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Akamai Technologies Inc Valuation – January 2016 $AKAM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Akamai Technologies Inc (AKAM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Akamai Technologies, Inc. is a provider of cloud services for delivering, optimizing and securing online content and business applications. Its solutions include delivery of conventional content on Websites, tools that support the delivery and operation of cloud-based applications, as well as security solutions, and live and on-demand streaming video capabilities. The Company’s solutions include Media Delivery Solutions, Performance and Security Solutions, and Service and Support Solutions. Media Delivery Solutions are designed to enable enterprises to execute their digital media distribution strategies. Performance and Security Solutions are designed to utilize the Company’s core content and application delivery technologies of the Company to make the Internet work better. Service and Support Solutions offer professional services and solutions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $8,220,779,005 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.65 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 214.79% Pass
6. Moderate PEmg Ratio PEmg < 20 26.77 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.59 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.70 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AKAM value chart January 2016

EPSmg $1.66
MG Growth Estimate 12.76%
MG Value $56.34
Opinion Fairly Valued
MG Value based on 3% Growth $24.02
MG Value based on 0% Growth $14.08
Market Implied Growth Rate 9.14%
Current Price $44.35
% of Intrinsic Value 78.71%

Akamai Technologies Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends along with the high PEmg and PB ratios.  The Enterprising Investor is only initially concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.90 in 2011 to an estimated $1.66 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 9.14% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Akamai Technologies Inc (AKAM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AKAMcharts January 2016

Net Current Asset Value (NCAV) $0.62
Graham Number $26.99
PEmg 26.77
Current Ratio 3.65
PB Ratio 2.59
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Total Current Assets $1,210,985,000
Total Current Liabilities $332,006,000
Long-Term Debt $619,365,000
Total Assets $4,184,809,000
Intangible Assets $1,294,478,000
Total Liabilities $1,099,146,000
Shares Outstanding (Diluted Average) 180,364,000

Earnings Per Share History

Next Fiscal Year Estimate $1.87
Dec2014 $1.84
Dec2013 $1.61
Dec2012 $1.12
Dec2011 $1.07
Dec2010 $0.90
Dec2009 $0.78
Dec2008 $0.79
Dec2007 $0.56
Dec2006 $0.34
Dec2005 $2.11
Dec2004 $0.25
Dec2003 -$0.25
Dec2002 -$1.81
Dec2001 -$23.59
Dec2000 -$10.07
Dec1999 -$1.98
Dec1998 -$0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.66
Dec2014 $1.47
Dec2013 $1.22
Dec2012 $1.00
Dec2011 $0.90
Dec2010 $0.76
Dec2009 $0.77
Dec2008 $0.78
Dec2007 $0.72
Dec2006 $0.57
Dec2005 -$1.09
Dec2004 -$4.16
Dec2003 -$6.76
Dec2002 -$9.18
Dec2001 -$10.95
Dec2000 -$3.89
Dec1999 -$0.67

Recommended Reading:

Other ModernGraham posts about the company

Akamai Technologies Inc. Analysis – August 2015 Update $AKAM
Akamai Technology Stock Analysis – May 2015 Quarterly Update $AKAM
28 Companies in the Spotlight This Week – 2/28/15
Akamai Technologies Inc. Quarterly Valuation – February 2015 $AKAM
22 Companies in the Spotlight This Week – 11/29/14

Other ModernGraham posts about related companies

Infosys Ltd Valuation – January 2016 Update $INFY
Total System Services Inc. Valuation – November 2015 Update $TSS
International Business Machines Corp Valuation – November 2015 Update $IBM
Motorola Solutions Inc. Valuation – November 2015 Update $MSI
Qualcomm Inc. Valuation – October 2015 Update $QCOM
Cognizant Technology Solutions Corp Analysis – October 2015 Update $CTSH
Infosys Limited Analysis – October 2015 Update $INFY
Teradata Corporation Analysis – September 2015 Update $TDC
Akamai Technologies Inc. Analysis – August 2015 Update $AKAM
Total System Services Inc. Analysis – August 2015 Update $TSS

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

 

Akamai Technologies Inc. Analysis – August 2015 Update $AKAM

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Akamai Technologies (AKAM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Akamai Technologies, Inc. is a provider of cloud services for delivering, optimizing and securing online content and business applications. Its solutions include delivery of conventional content on Websites, tools that support the delivery and operation of cloud-based applications, as well as security solutions, and live and on-demand streaming video capabilities. The Company’s solutions include Media Delivery Solutions, Performance and Security Solutions, and Service and Support Solutions. Media Delivery Solutions are designed to enable enterprises to execute their digital media distribution strategies. Performance and Security Solutions are designed to utilize the Company’s core content and application delivery technologies of the Company to make the Internet work better. Service and Support Solutions offer professional services and solutions.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AKAM – August 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Pass
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Fail
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.60
MG Growth Estimate 11.75%
MG Value $51.09
Opinion Overvalued
MG Value based on 3% Growth $23.15
MG Value based on 0% Growth $13.57
Market Implied Growth Rate 18.07%
Current Price $71.26
% of Intrinsic Value 139.47%

Akamai Technologies (AKAM) qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the lack of dividends as well as the high PEmg and PB ratios.  The Enterprising Investor is only concerned by the lack of dividends.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.90 in 2011 to an estimated $1.60 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 18.07% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Akamai Technologies (AKAM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AKAM Charts August 2015

Net Current Asset Value (NCAV) $0.36
Graham Number $25.31
PEmg 44.63
Current Ratio 3.31
PB Ratio 4.23
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $1,151,476,000
Total Current Liabilities $348,242,000
Long-Term Debt $614,484,000
Total Assets $4,131,105,000
Intangible Assets $1,301,677,000
Total Liabilities $1,085,793,000
Shares Outstanding (Diluted Average) 180,738,000

Earnings Per Share History

Next Fiscal Year Estimate $1.69
Dec14 $1.84
Dec13 $1.61
Dec12 $1.12
Dec11 $1.07
Dec10 $0.90
Dec09 $0.78
Dec08 $0.79
Dec07 $0.56
Dec06 $0.34
Dec05 $2.11
Dec04 $0.25
Dec03 -$0.25
Dec02 -$1.81
Dec01 -$23.59
Dec00 -$10.07
Dec99 -$1.98
Dec98 -$0.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.60
Dec14 $1.47
Dec13 $1.22
Dec12 $1.00
Dec11 $0.90
Dec10 $0.76
Dec09 $0.77
Dec08 $0.78
Dec07 $0.72
Dec06 $0.57
Dec05 -$1.09
Dec04 -$4.16
Dec03 -$6.76
Dec02 -$9.18
Dec01 -$10.95
Dec00 -$3.89
Dec99 -$0.67

Recommended Reading:

Other ModernGraham posts about the company

Akamai Technology Stock Analysis – May 2015 Quarterly Update $AKAM
28 Companies in the Spotlight This Week – 2/28/15
Akamai Technologies Inc. Quarterly Valuation – February 2015 $AKAM
22 Companies in the Spotlight This Week – 11/29/14
Akamai Technologies Inc. Quarterly Valuation – November 2014 $AKAM

Other ModernGraham posts about related companies

Total System Services Inc. Analysis – August 2015 Update $TSS
Acxiom Corporation Analysis – Initial Coverage $ACXM
ACI Worldwide Inc. Analysis – Initial Coverage $ACIW
Motorola Solutions Inc. Analysis – July 2015 Update $MSI
Qualcomm Inc. Analysis – July 2015 Update $QCOM
Cognizant Technology Solutions Corp Analysis – July 2015 Update $CTSH
Equinix Inc. Analysis – Initial Coverage $EQIX
Infosys Analysis – June 2015 Update $INFY
Verisign Inc. Analysis – 2015 Update $VRSN
Teradata Corporation Analysis – June 2015 Update $TDC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Akamai Technology Stock Analysis – May 2015 Quarterly Update $AKAM

220px-Akamai_logo.svgA lot of investors and analysts considering Akamai Technologies (AKAM) are focused primarily on qualitative speculation about the company’s prospects. For example, Seeking Alpha contributor Trefis noted thatthe company’s acquisition strategy will boost its long-term value. On the other hand, Stock Traders Daily recently focused on various valuation metrics such as the PEG ratio to determine that the company is generally attractive but carries some risk of a pull back. However, it is critical when analyzing Akamai to consider the company’s intrinsic value in relation to its price.

In fact, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether a company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a Akamai Technologies stock analysis giving a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

AKAM Chart

AKAM data by YCharts

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – PASS
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least 1/3 over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – FAIL
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $77.37
MG Value $70.33
MG Opinion Overvalued
Value Based on 3% Growth $26.49
Value Based on 0% Growth $15.53
Market Implied Growth Rate 16.93%
Net Current Asset Value (NCAV) $1.31
PEmg 42.36
Current Ratio 4.62
PB Ratio 4.69

Balance Sheet – March 2015

Current Assets $1,242,000,000
Current Liabilities $269,000,000
Total Debt $610,000,000
Total Assets $3,987,000,000
Intangible Assets $1,195,000,000
Total Liabilities $1,005,000,000
Outstanding Shares 180,800,000

Earnings Per Share

2015 (estimate) $2.38
2014 $1.84
2013 $1.61
2012 $1.12
2011 $1.07
2010 $0.90
2009 $0.78
2008 $0.79
2007 $0.56
2006 $0.34
2005 $2.11

Earnings Per Share – ModernGraham

2015 (estimate) $1.83
2014 $1.47
2013 $1.22
2012 $1.00
2011 $0.90
2010 $0.76

Dividend History

Akamai does not pay a dividend.

Conclusion

Akamai passes the initial requirements of the Enterprising Investor but not of the more conservative Defensive Investor. The Defensive Investor is concerned with the lack of dividends and the high PEmg and PB ratios. The Enterprising Investor is only concerned by the lack of dividends. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $0.90 in 2011 to an estimated $1.83 for 2015. This level of earnings growth does not support the market’s implied estimate for 16.93% annual growth over the next 7-10 years.

In fact, the recent earnings growth has averaged nearly 21% per year, but a rate that high is very rarely attainable over the long term. As a result, the ModernGraham valuation model uses a much more conservative growth estimate and returns an estimate of intrinsic value falling below the market’s price, indicating that Akamai is overvalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Akamai Technologies Inc. Quarterly Valuation – February 2015 $AKAM

220px-Akamai_logo.svg

Akamai is suitable for the Enterprising Investor, but not the more conservative Defensive Investor, who is concerned with the lack of dividends, as well as the high PEmg and PB ratios. The Enterprising Investor, on the other hand, is only concerned by the lack of dividends. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $0.76 in 2010 to only $1.47 for 2014. This demonstrated growth does not support the market’s implied estimate of 19.61%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.

Be sure to check out previous ModernGraham valuations of Akamai Technologies Inc. (AKAM) for greater perspective!

Read the full valuation on Seeking Alpha!

AKAM Chart

AKAM data by YCharts

Disclaimer:  The author did not hold a position in Akamai Technologies Inc. (AKAM) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Akamai Technologies Inc. Quarterly Valuation – November 2014 $AKAM

220px-Akamai_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – November 2014.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Akamai Technologies Inc. (AKAM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Akamai Technologies, Inc. (Akamai) provides content delivery and cloud infrastructure services for the delivery of content and applications over the Internet. The Company’s solutions range from delivery of conventional content on Websites, to tools that support the delivery and operation of cloud-based applications, to live and on-demand streaming video capabilities all designed to help its customers interact with people accessing the Internet from myriad devices and locations around the world. The Company offers five solutions designed to meet the online business needs of its customers: Terra, Aqua, Sola, Kona and Aura. In February 2014, Akamai Technologies Inc completed the acquisition of Prolexic Technologies Inc.

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $63.72
MG Value $63.76
MG Opinion Fairly Valued
Value Based on 3% Growth $24.01
Value Based on 0% Growth $14.08
Market Implied Growth Rate 14.99%
Net Current Asset Value (NCAV) $0.81
PEmg 38.48
Current Ratio 3.82
PB Ratio 4.05

Balance Sheet – September 2014

Current Assets $1,153,000,000
Current Liabilities $302,000,000
Total Debt $600,000,000
Total Assets $3,854,000,000
Intangible Assets $1,190,000,000
Total Liabilities $1,006,000,000
Outstanding Shares 181,000,000

Earnings Per Share

2014 (estimate) $2.40
2013 $1.61
2012 $1.12
2011 $1.07
2010 $0.90
2009 $0.78
2008 $0.79
2007 $0.56
2006 $0.34
2005 $2.11
2004 $0.25

Earnings Per Share – ModernGraham

2014 (estimate) $1.66
2013 $1.22
2012 $1.00
2011 $0.90
2010 $0.76
2009 $0.77

Dividend History
Akamai Technologies does not pay a dividend.

Conclusion:

Akamai Technologies qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of dividend payments as well as the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel very comfortable proceeding with further research and comparing the company to other opportunities.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $0.76 in 2010 to an estimated $1.66 for 2014.  This level of demonstrated growth supports the market’s implied estimate of 14.99% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to the price.

Be sure to check out previous ModernGraham valuations of Akamai Technologies Inc. (AKAM) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Akamai Technologies Inc. (AKAM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Akamai Technologies Inc. (AKAM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Akamai Technologies Inc. Quarterly Valuation – August 2014 $AKAM

220px-Akamai_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Undervalued Companies for the Enterprising Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Akamai Technologies Inc. (AKAM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Akamai Technologies, Inc. (Akamai) provides content delivery and cloud infrastructure services for the delivery of content and applications over the Internet. The Company’s solutions range from delivery of conventional content on Websites, to tools that support the delivery and operation of cloud-based applications, to live and on-demand streaming video capabilities all designed to help its customers interact with people accessing the Internet from myriad devices and locations around the world. The Company offers five solutions designed to meet the online business needs of its customers: Terra, Aqua, Sola, Kona and Aura. In February 2014, Akamai Technologies Inc completed the acquisition of Prolexic Technologies Inc.
AKAM Chart

AKAM data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $60.27
MG Value $52.82
MG Opinion Overvalued
Value Based on 3% Growth $21.11
Value Based on 0% Growth $12.38
Market Implied Growth Rate 16.45%
Net Current Asset Value (NCAV) $1.14
PEmg 41.39
Current Ratio 4.23
PB Ratio 3.87

Balance Sheet – 6/30/2014

Current Assets $1,199,700,000
Current Liabilities $283,300,000
Total Debt $595,400,000
Total Assets $3,768,700,000
Intangible Assets $1,198,300,000
Total Liabilities $995,900,000
Outstanding Shares 178,270,000

Earnings Per Share

2014 (estimate) $1.80
2013 $1.61
2012 $1.12
2011 $1.07
2010 $0.90
2009 $0.77
2008 $0.78
2007 $0.55
2006 $0.32
2005 $2.09
2004 $0.23

Earnings Per Share – ModernGraham

2014 (estimate) $1.46
2013 $1.22
2012 $0.99
2011 $0.89
2010 $0.76
2009 $0.76

Dividend History

Akamai Technologies does not pay a dividend.

Conclusion:

Akamai Technologies is suitable for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned with the lack of dividend payments and the high PEmg and PB ratios, while the Enterprising Investor’s only concern is the lack of dividend payments.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with research into the company and comparing it to other opportunities.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $0.76 in 2010 to an estimated $1.46 for 2014.  This level of demonstrated growth does not support the market’s implied estimate of 16.45% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Akamai Technologies (AKAM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Akamai Technologies (AKAM) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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