Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is This Company Sitting on a Tower of Potential Profits?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Shares of American Tower (NYSE: AMT  ) hit a 52-week high on Tuesday. Let's take a look at how it got there and see if clear skies are still in the forecast.

How it got here
Not since 4G LTE technology was introduced to the world has there been such buzz in the cellular tower sector.

The three companies that comprise the tower sector -- American Tower, Crown Castle (NYSE: CCI  ) , and SBA Communications (Nasdaq: SBAC  ) -- have all been in rally mode over the past month following the announced deals that Deustche Telekom's T-Mobile will be purchasing MetroPCS Communications (NYSE: PCS  ) and that SoftBank will be taking a majority stake in Sprint Nextel (NYSE: S  ) . Both Sprint and MetroPCS have struggled to build-out their advanced 4G networks, and capital infusions from SoftBank and T-Mobile should help fuel infrastructure build-out and spur antenna spending and data usage for all tower companies. Crown Castle, of course, is really licking its chops, since it holds exclusive rights to T-Mobile's data usage via a multi-decade contract signed last month.

The entire sector is also a play on future mobile data growth. With the introduction of tablets, the reliance on PCs is waning, creating even more growth opportunities for tower companies. Many of these companies also boast high gross margins since it's both quick and cheap to simply add antennas to existing towers.

The concern with tower companies is their massive debt load which comes from their need to expand their coverage and build towers to meet mobile providers' needs.

How it stacks up
Let's take a look at how American Tower compares to its peers.

AMT Chart

AMT data by YCharts.

Correlated much? It's almost scary how correlated these movements are!



Price/Cash Flow

Forward P/E


American Tower





Crown Castle





SBA Communications





Sources: Morningstar and Yahoo! Finance. NM = not meaningful; earnings are expected to be negative over the next 12 months.

Value investors, turn around now lest ye be turned to stone! That debt-to-equity column is enough to make anyone gasp for air.

As a play on free cash flow, these tower companies' metrics aren't nearly as horrific as the above figures would suggest, but they aren't that great, either. American Tower is a consistently profitable company and has garnered the love of income investors now that it's officially classified as a real estate investment trust. As a REIT, it receives favorable tax status in exchange for returning 90% or more of its earnings in the form of a dividend to shareholders. Neither Crown Castle nor SBA pay a dividend.

Crown Castle is bound to see a boost in its figures over the coming years as it realizes a increase in data usage thanks to T-Mobile's MetroPCS investment. SBA, on the other hand, has been a horror. It hasn't turned an annual profit once in the past decade, and has missed Wall Street's EPS projections in 14 consecutive quarters!

What's next
Now for the $64,000 question: What's next for American Tower? The answer is dependent on the company's ability to add new antennas and build towers to meet mobile providers' needs, as well as prudently regulate its high debt load.

Our very own CAPS community gives the company a four-star rating (out of five), with 91.4% of members expecting it to outperform. Although I've yet to "officially" make a CAPScall rating on American Tower, apparently I did support an outperform call in April, yet the selection of that pick appears to have never actually made it into my CAPS portfolio.

I will be rectifying that this go-around and making sure to select American Tower with an outperform rating. Even after the sector run-up I'd call American Tower the clear leader in both margins and balance sheet health. American Tower provides its shareholders a 1.3% yield and just might be the only truly sustainable tower company over the long-term, as I hold underperform CAPScalls on both Crown Castle and SBA Communications.

American Tower isn't the only company set to benefit from a boost in mobile usage. Find out which company our analysts at Stock Advisor have highlighted as leading the next trillion-dollar revolution, for free, by clicking here to get your copy of this latest special report.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend American Tower . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2060978, ~/Articles/ArticleHandler.aspx, 10/27/2016 11:27:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,200.50 1.17 0.01%
S&P 500 2,136.79 -2.64 -0.12%
NASD 5,236.04 -14.23 -0.27%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 11:11 AM
AMT $116.21 Up +0.54 +0.47%
American Tower CAPS Rating: ****
CCI $91.78 Down -0.75 -0.81%
Crown Castle Inter… CAPS Rating: **
S $6.29 Down -0.08 -1.18%
Sprint CAPS Rating: **
SBAC $114.89 Down -0.37 -0.32%
SBA Communications CAPS Rating: **
TMUS $49.32 Down -0.18 -0.36%
T-Mobile US CAPS Rating: ***