Akamai Technologies, Inc. (AKAM): Sell the Shovel and Forget the Gold

InterNAP Network Services (NASDAQ:INAP)’s profit margin of -2.2% and EBIT margin of 1% place it in a marginally better position than Level 3 Communications. Internap’s balance sheet is much cleaner with a total debt to equity ratio of 0.83, but the company is still struggling to define itself in a profitable manner. 2014 isn’t looking too bright, and it is expected to lose money.

AKAM Free Cash Flow Per Share TTM data by YCharts

Conclusion

Akamai operates a world class CDN and is a quality investment. The company has consistently produced free cash flow, has a clean balance sheet with a total debt to equity ratio of 0, has a profit margin of 16.3% and boosts an EBIT margin of 24.7%. The company’s huge network helps it to maintain its dominance as bandwidth and security needs continue to increase.

Level 3 Communications and Internap’s inability to produce free cash flow is a major warning sign. The CDN world is filled with tough competition and price cutting. Akamai Technologies, Inc. (NASDAQ:AKAM) has been able to maintain a substantial customer base and an extensive network. Level 3 is still stuck in the past and its wholesale contracts drag it down. Internap is an interesting player to watch with its growing datacenter business, but it doesn’t offer the same dominance or margins as Akamai.

The article Sell the Shovel and Forget the Gold originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Joshua is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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