Bad businesses don't die quickly, even in the fast-moving world of technology. Think about AOL. This about-to-be-spun-off division of Time Warner
Worth hundreds of billions at the time of the merger, and perhaps as much as $20 billion when Google
The answer's surprisingly simple: AOL and peers such as United Online's
An even better deal
Value hunters must love that; four times cash flow for a business that's still producing plenty of it. And yet scavengers might like EarthLink
The math is equally compelling. EarthLink sports high returns on capital and equity (19.6% and 25.6%, respectively, over the prior 12 months), generates strong cash flows from operations ($214.5 million over the past year), and derives roughly half its market value from cash in the bank.
And the story doesn't end there. EarthLink also uses a portion of its sturdy cash flows to pay a 6.90% dividend yield, well above the less-than-1% payouts from tech stalwarts Oracle
Even so, our 145,000-strong Motley Fool CAPS community remains unsure about EarthLink, rating it a two out of five possible stars. The rest of the details:
Metric |
|
---|---|
CAPS stars (out of 5) |
** |
Total ratings |
284 |
Percent Bulls |
71.5% |
Percent Bears |
28.5% |
Bullish pitches |
33 out of 44 |
Data current as of Nov. 29.
Years of decline and a virtually obsolete technology explain a lack of enthusiasm for this stock. But skepticism can also be the seed that bears fruit for patient value investors, even in the disruptive world of technology. I like their chances with EarthLink.
But that's also just my take. Now it's your turn to weigh in. Would you buy shares of EarthLink at today's prices? Please visit CAPS and take a moment to rate EarthLink. You can also sound off in the comment box below.