|
|
|
|
This Latin American Telecom
has Risen +575% in the Last Four Years and Still has Room to Run |
Published:
January 21, 2008
Latin
America has been one of the best places to stash your money
lately. In fact, the S&P Latin 40 Index has delivered robust
annualized gains of +43% over the past four years, through
2007. And even by
those lofty standards, America Movil (NYSE: AMX, $52.70) has
been a true standout -- posting a sizzling cumulative gain of
+575% over the same time frame.
After such a powerful rally, you might assume that the stock is
exorbitantly priced and well out of reach. But that just isn't
the case. In fact, the shares are trading at just
13 times next
year's earnings. That multiple is highly compelling against
America Movil's lofty 5-year projected earnings growth of +32.5%.
So on a price-to-earnings-to-growth (PEG) basis, AMX is a
veritable steal compared to slower-moving U.S. telecoms like
Sprint (NYSE: S) or Verizon (NYSE: VZ).
Clearly, given the tremendous run-up in the stock, America Movil
isn't undervalued because it has run into problems, but because
the firm's core business is growing by leaps and bounds.
Spun off from Mexican long distance carrier Telmex seven years
ago, America Movil has grown to become Latin America's leading
telecommunications firm. Today, the company controls a dominant
70% share of the Mexican cellular phone market and has built a
base of 140 million wireless customers in Brazil, Argentina and
more than a dozen other countries -- including portions of the
Caribbean and the United States.
Wireless penetration rates have soared in recent years. For
example, nearly 90% of Venezuela's 27 million residents now have
cell phones. As those rates inch ever higher, the days of heady
subscriber growth may be ending in some markets. However, there
is still considerable untapped opportunity in many regions, such
as India -- where penetration currently stands at just 18%.
And it seems likely that America Movil is on the hunt for
expansion opportunities. The firm made a play for Telecom Italia
(NYSE: TI) earlier this year, and while the bid came up short, the takeover
attempt does suggest that management is looking to branch out
beyond its core Latin American turf.
None of this is to say that the firm's growth is about to hit a
wall -- analysts are forecasting total 2007 earnings to end up
at $2.92 per share, and then jump $4.02 per share in 2008. However, even with
flat growth, America Movil would still be attractive.
The firm's 140 million customers generate revenues in excess of
$20 billion per year, and with one of the strongest operating
margins (28%) in the industry, those sales produce more than $6
billion in annual operating cash flows. As expansion needs wind
down, more and more of that cash flow will be funneled into
dividends and share repurchases.
With the potential for a hefty gain of +52% before reaching its
fair value, AMX offers an
attractive risk/reward profile for anyone looking to boost their
exposure to the booming Latin American markets.
|
Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
|
| To receive
in-depth guidance on today's leading value opportunities every other weekend, plus educational guidance, please subscribe to
Nathan Slaughter & Paul Tracy's premium value investing newsletter --
Half-Priced
Stocks |
|
|
|
Income Security
of the Month
Our "Income Security of the Month" for May 2008 invests in
a fast-growing overseas market that doesn't get much exposure in the
mainstream financial press. And although it typically makes enormous
annual dividend payments -- it has paid an average dividend of 24.5%
per year over the past five years -- this fund is perhaps most
appealing for its total return potential. Specifically, the fund has
delivered total returns of +297.3% since 2003, and
it ranks in the top 10% of its category over the past decade.
|
Top
10 Stocks for 2008!
Since we began publishing this report back in 2003, the picks we've
featured have consistently beaten the broader market -- delivering average
gains of +21.3% per year and outperforming the S&P by a nearly
2-to-1 margin. Act now to reserve your copy of our newest report -- Top
Ten Stocks for 2008. |
|
|
