Recently, Dr. Tom Leighton, the CEO of Akamai Technologies, Inc. (NASDAQ:AKAM), bought 30,000 shares of the company for around $34.75 per share, with a total transaction value of more than $1 million. At the beginning of February, he spent nearly $1.76 million to purchase 50,000 shares of the company. In the past twelve months, Akamai’s stock price has experienced a decline of more than 7%. Should we follow Dr. Tom Leighton into Akamai? Let’s find out.
Akamai Technologies, Inc. (NASDAQ:AKAM), incorporated in 1998, is the content delivery and cloud infrastructure services provider with five main solutions: Terra, Aqua, Sola, Kona and Aura Network Solutions. Terra is used for improving the operation of highly dynamic applications, which are used by companies to connect with customers, suppliers and employees. Aqua is to accelerate business-to-consumer websites with rich and collaborative contents. Sola is used to help customers execute digital media and software distribution strategies. Kona is used extensively for cloud computing security, and Aura is used for network operators to build their own CDN capabilities. In 2012, Akamai generated around 28% of its total revenue from outside of the U.S., while European revenue accounted for around 17% of the total revenue. Akamai Technologies, Inc. (NASDAQ:AKAM) has quite a diverse customer base, with no single customer representing more than 10% of its total revenue for the past three years. The company’s customers are all big corporations, such as Adobe Systems Incorporated (NASDAQ:ADBE), Apple Inc. (NASDAQ:AAPL), Audi AG (FRA:NSU), The Home Depot, Inc. (NYSE:HD), Microsoft Corporation (NASDAQ:MSFT), MTV Networks, etc.
Consistent growth without any leverage
In the past five years, Akamai has generated a consistently increasing top line and bottom line. Its revenue grew from $791 million in 2008 to $1.37 billion in 2012, while net income gradually rose from $145 million, or $0.79 per share to $204 million, or $1.12 per share, during the same period. What I like about Akamai Technologies, Inc. (NASDAQ:AKAM) is its ability to generate consistently growing cash flow. Since 2008, its operating cash flow has increased from $343 million to $530 million, whereas the free cash flow experienced a 6.4% annualized growth to $311 million for the past five years.
Furthermore, Akamai could consistently grow without any leverage. As of December 2012, it had nearly $2.35 billion in total stockholders’ equity, $437 million in cash and no debt. The company also recorded as much as $658 million in marketable securities investments. Thus, the total cash, cash equivalents and unrestricted marketable equities were more than $1 billion combined at the end of 2012.