Thursday, August 9, 2007

InterNAP Network Services

InterNAP Network Services is a NASDAQ listed security that has been trading in a range between $12.95 and $21.25 over the past year. With 49,507,000 shares outstanding, a recent price of $13.49 gives a total market capitalization of $693,098,000. While there are certainly larger companies, InterNAP Network Services has definitely earned its place in the pack. Last year, InterNAP Network Services created $-0.23 in earnings for every share outstanding.

InterNAP Network Services is currently priced by the market at 0.00 times last year’s earnings. Many trading multiples around the world are quite attractive these days, but don’t be fooled. A Price to Earnings ratio of 0 simply means that the security didn’t make any money last year.

With a share price under $50 a share and earnings per share below $1 a share, InterNAP Network Services is unlikely to be an interesting value proposition. Consistent earnings are the key to high valuations and this security is not on its way.

Note: Despite the ongoing interest from a wide variety of internet investors, InterNAP simply hasn't delivered. While revenues increased 33% in the past quarter, the company actually lost money. The market segment that InterNAP is fighting for has been growing much more rapidly than the company itself. Even the most bullish analysts don't expect the company to greatly exceed $20 a share 12 months from now. Given that the stock traded as high as $21.25 this year, that hardly qualifies as progress. In fact, the company's current valuation is overly optimistic. Trading at 37 times the company's projected next year's earnings, even by the standards of the tech sector, InterNAP is a waste of capital.

Don't invest in InterNAP. There might be a valuable trade here if you can convince some other poor sap to buy your shares for more later, but don't expect the company to create the sort of sustained profits necessary to a high long-term valuation.

1 comments:

NEW AGE said...

Your evaluation of INAP is incorrect.To keep you updated, INAP closed on 08/10/2007 at $15.80.This was possibly the worst week for the markets and yet there was a strong support for INAP.