Akamai Technologies Inc (AKAM, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at 107.55, Akamai Technologies Inc has witnessed a daily gain of 0%, marked against a three-month change of 21.6%. A thorough analysis, underlined by the GF Score, suggests that Akamai Technologies Inc is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
For Akamai Technologies Inc, the GF Score components are as follows:
- Financial strength rank: 6/10
- Profitability rank: 9/10
- Growth rank: 10/10
- GF Value rank: 6/10
- Momentum rank: 6/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high growth rank and a solid profitability rank, GuruFocus assigned Akamai Technologies Inc the GF Score of 93 out of 100, which signals the highest outperformance potential.
Understanding Akamai Technologies Inc's Business
Akamai Technologies Inc, with a market cap of $16.32 billion and sales of $3.66 billion, operates a content delivery network (CDN), which entails locating servers at the edges of networks so its customers, which store content on Akamai servers, can reach their own customers faster, more securely, and with better quality. Akamai has over 325,000 servers distributed over 4,100 points of presence in more than 1,000 cities worldwide. Its customers generally include media companies, which stream video content or make video games available for download, and other enterprises that run interactive or high-traffic websites, such as e-commerce firms and financial institutions. Akamai also has a significant security business, which is integrated with its core delivery and computing businesses to protect customers from cyberthreats.
Financial Strength Breakdown
According to the Financial Strength rating, Akamai Technologies Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Akamai Technologies Inc stands impressively at 81.68, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.9, Akamai Technologies Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Akamai Technologies Inc's impressive standing among its peers in generating profit. Akamai Technologies Inc Operating Margin has increased (27.88%) over the past five years, as shown by the following data: 2018: 15.33; 2019: 19.98; 2020: 21.94; 2021: 23.32; 2022: 19.60. Akamai Technologies Inc's strong Predictability Rank of 4.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Akamai Technologies Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 8.6%, which outperforms better than 51.26% of 2413 companies in the Software industry. Moreover, Akamai Technologies Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 8.2, and the rate over the past five years is 15.2. This trend accentuates the company's continued capability to drive growth.
Conclusion
With its strong financial strength, profitability, and growth metrics, the GF Score highlights Akamai Technologies Inc's unparalleled position for potential outperformance. This comprehensive analysis underscores the company's robust financial health and growth prospects, making it a compelling investment opportunity for value investors. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
