I'm a believer in growth stocks. As an analyst for our Motley Fool Rule Breakers service, I think you should be a believer, too. But even I have to admit some growth stories are bogus, hence this regular series. We'll be taking a closer look at many of the market's great growth stocks to see which of them show real, numerically relevant signs of sustainability.

Next up in our series is Akamai Technologies (Nasdaq: AKAM), a multibagger selection for our Rule Breakers portfolio that's been on a tear lately. Readers want to know if this growth story is sustainable.

We've seen some good signs. Last month, insiders began a buying spree at around $38.78 a share. CEO Paul Sagan added 15,000 shares to his stake, while company president David Kenny bought 25,000 and director Peter Knight got 47,950. Knight was the last to buy, at an average price of $41.70 a share.

Foolish facts

Metric

Akamai

CAPS stars (5 max)

****

Total ratings

3,047

Percent bulls

95.9%

Percent bears

4.1%

Bullish pitches

425 out of 446

Highest rated peers

On2 Technologies, iPass, PHOTOCHANNEL NETWORKS

Data current as of Sept. 7.

Fools like Akamai, even if some think the stock has run too far, too fast. "The fact that the stock jumped over 20% the day they announced earnings despite reporting almost ZERO profit and revenue growth should have been a big sign," wrote icu81mi recently.

And that's from a Fool who likes Akamai:

I really like this company long term, I even own a few shares, but the stock has gotten way ahead of itself. I hedged before earnings, which I'm glad I did but I'm hanging on to that hedge a little while longer because some of this froth has got to go.

The elements of growth

Metric

Last 12 Months

2009

2008

Normalized net income growth

(4.5%)

(7.3%)

65.1%

Revenue growth

12.8%

8.7%

24.3%

Gross margin

73.5%

73.5%

76.9%

Receivables growth

13.9%

10.5%

17.4%

Shares outstanding

181.6 million

171.2 million

169.4 million

Source: Capital IQ, a division of Standard & Poor's.

There's a confusing mix of numbers in this table, not all of which are good. Let's review:

  • Bad news first: Revenue and normalized net income growth have proven inconsistent. That's usually a bad sign, especially for a market leader.
  • Nor do we like to see a rising share count. In Akamai's case, in-the-money exercises of employee stock options are helping to create the dilution.
  • Fortunately, gross margins remain high and receivables growth is moderate and in line with what we've seen historically. (Akamai tends to sign contracts, deliver content, and then collect. Healthy receivables growth tends to lead income growth for this Rule Breaker.)

Competitor checkup

Competitor

Normalized Net Income Growth (3 years)

Akamai

23.8%

AT&T (NYSE: T)

11.6%

F5 Networks (Nasdaq: FFIV)

15.1%

Internap Network Svcs. (Nasdaq: INAP)

Not material

Level 3 Communications (Nasdaq: LVLT)

Not material

Limelight Networks (Nasdaq: LLNW)

Not material

Source: Capital IQ, a division of Standard & Poor's. Data current as of Sept. 2.

This table is far more reassuring. Not only is Akamai the fastest grower, but also the lack of material long-term income growth among direct competitors such as Level 3 and Limelight is demonstrative of Akamai's market power.

Grade: sustainable
Akamai leads a volatile market that's subject to pricing pressure and attractive to big data center operators, such as AT&T. And yet Akamai has faced big competitors before and come out ahead. It's been a market leader for more than a decade. I see no reason why that can't continue.

Now it's your turn to weigh in. Do you like Akamai at these levels? Would you make it one of our 11 O'Clock Stocks? Let the debate begin in the comments box below, and when you're done, click here to get today's 11 O'Clock portfolio pick. You can also ask Tim to evaluate a favorite growth story by sending him an email, or replying to him on Twitter.

For further Foolishness featuring Akamai Technologies:

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Akamai is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Akamai at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy thinks Monty Python is sustainably funny.