Should We Pay Attention To A Recent CEO Buy At Akamai Technologies, Inc. (AKAM)?

Peer comparison

At around $35 per share, Akamai Technologies, Inc. (NASDAQ:AKAM) is worth about $6.2 billion on the stock market. The market values Akamai at nearly 11.5 times EV/EBITDA and 4.5 times sales. Actually, Akamai is a bit cheaper than the ratio indicates. If we adjust its cash and unrestricted marketable securities value of around $1 billion combined, the total enterprise value would be $5.17 billion, valuing Akamai at only 10.2 times EV/EBITDa. Compared to other peers, including Level 3 Communications, Inc. (NYSE:LVLT) and Limelight Networks, Inc. (NASDAQ:LLNW), Akamai is the largest and the most expensive company. Level 3, at $21 per share, has a total market cap of $4.6 billion. It is valued at only 8.82 times EV/EBITDA and 0.72 times sales. Limelight is the smallest company among the three, with only around $210 million in total market cap. At $2 per share, the market values Limelight at nearly 1.2 times sales. While it generated negative EBITDA over the past twelve months, the EV/EBITDA ratio is not valid.

Akamai seems to deserve the highest valuation, as it is the most profitable company. It has the highest operating margin at 24.4%, while the operating margin of Level 3 is only 10.3%. Limelight generated a negative operating margin of -21.6%.

The Foolish bottom line

With a debt-free operation, high profitability and a reasonable valuation, Akamai Technologies, Inc. (NASDAQ:AKAM) seems to be a good stock to hold in a long run. However, as Akamai is in the competitive Internet content acceleration industry, its future is not easy to predict. Personally, I would demand a lower stock price before initiating a long position in this stock.

The article Should We Pay Attention To A Recent CEO Buy At Akamai? originally appeared on Fool.com and is written by Anh HOANG.

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