Internet services company Web.com Group
Web.com seeks to provide one-stop services for entrepreneurial small businesses and individuals. You can buy a domain name and get hosting, email, SEO, and many other services all in one place. You can even use the company's platform to self-publish your website, or Web.com can design and manage it for you. As you can imagine, there is plenty of demand in this area, as the 102.5% increase in trailing-12-month sales attests to.
But sales growth alone isn't enough to sustain a business. At the end of the day, investors also need to consider the soundness of financial statements, which is precisely where Web.com is lacking. It has enormously high debt, standing at more than three times equity. On top of that, Web.com isn't even making money! It hasn't turned a profit since 2009, when it made just over $1.5 million. Keep in mind the market value of the company is currently creeping toward $800 million.
In addition to the financial weakness of the firm, it operates in a fiercely competitive industry, with fairly low barriers to entry.
Web.com operates in an emerging technological landscape, one that should be very lucrative for a handful of businesses. But right now, Web.com doesn't seem to be one of them. Until its financials start turning around and it starts showing a sustainable, positive earnings trend, competitors like Akamai and Rackspace look far more attractive.
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Fool contributor John Divine owns none of the stocks mentioned in the story above. He draws sprawling landscapes of pastures, blue skies, and cloud computers in his free time. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.
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