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Each year, we take a look back in order to look ahead. We do this by industry, by trend, and ultimately by stock. Here's a closer look at American Tower (NYSE: AMT ) , Fool style.
|CAPS rating (out of 5)||***|
|Bullish pitches||83 out of 98|
|Highest rated peers||VimpelCom, Tutor Perini, Turkcell Iletisim Hizmetleri|
Data current as of Dec. 28.
Fools can't decide whether love or loathe American Tower, which is quite literally in the business of building towers for transmission of wireless signals. AT&T (NYSE: T ) , Sprint Nextel (NYSE: S ) , and USA Mobility (Nasdaq: USMO ) are among its customers here in the U.S., yet the real opportunity exists overseas.
"In an obvious growth sector, and doing business in emerging markets with large populations that will most likely use wireless as [their] main line of communications, [especially] in rural areas with little infrastructure," wrote Foolish investor cut4dough earlier this month.
Looking back to look forward
Judging by the year's big American Tower stories at Fool.com, bullish investors have had plenty to snort about:
- In February, Gerard Torres went under the hood to look at the inherent efficiency in American Tower's business model. What he found is a company that generates far more revenue per tower than Crown Castle International (NYSE: CCI ) or SBA Communications (Nasdaq: SBAC ) , its two closest competitors.
- Three months later, American Tower easily exceeded earnings expectations as its two rivals missed Wall Street's marks. Around the same time, its acquisition of India's Essar Telecom doubled the size of its footprint on the subcontinent.
- In June, Gerard once more made the case for American Tower -- albeit implicitly this time. His profile of Crown Castle revealed it to be a far riskier play than its larger and better-positioned rival.
- By September, shares of American Tower were in the middle of a sustained rally that had begun in May. Research pointing to the decline of voice and the rise of mobile data networks would fuel further interest in the business.
- Two months later, the company once more easily bested Street expectations in reporting third-quarter results. Management also announced plans to acquire more than 3,000 cell towers in South Africa, adding to its emerging market portfolio.
Investors have been and are still correct to appreciate American Tower's growth ambitions, especially when it results in this sort of financial performance:
2009-2010 Quarterly Performance
|Normalized net income growth||16.7%||34.5%||19.6%||37.7%|
|Return on capital||5.9%||5.9%||6.2%||6.7%|
Source: Capital IQ, a division of Standard & Poor's.
And here's what analysts expect from this cash king over the next two years, according to data compiled by Capital IQ:
Capital IQ Estimates
|Revenue estimate||$2,270 million||$2,470 million|
|Normalized profit per share estimate||$1.13||$1.43|
Source: Capital IQ, a division of Standard & Poor's. Data current as of Dec. 28.
Foolish outlook: bullish
Going by the Street's estimates, American Tower is on track to grow its per-share earnings by more than 50% over the next two years. So while I wouldn't consider any stock trading in excess of 50 times earnings cheap, I can understand why investors have bid up the price to current levels. International expansion creates the opportunity for outsized growth, and that's exactly what American Tower is positioned to deliver.
Now it's your turn to weigh in. What do you think of American Tower's prospects at current prices? Use the comment box below to explain your thinking. You can also rate American Tower in Motley Fool CAPS.
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