5-Star Stocks Poised to Pop: Telefonica

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Spanish telecom giant Telefonica (NYSE: TEF  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Telefonica's business and see what CAPS investors are saying about the stock right now.

Telefonica facts

Headquarters (Founded)	Madrid (1924)
Market Cap	$95.1 billion
Industry	Integrated telecom services
Trailing-12-Month Revenue	$91.42 billion
Management	CEO Cesar Izuel (since 2000) CFO Santiago Valbuena (since 2002)
Return on Equity (Average, Past 3 Years)	39.7%
Cash/Debt	$7.4 billion / $85.3 billion
Dividend Yield	9.4%
Competitors	America Movil (NYSE: AMX  ) Vodafone (Nasdaq: VOD  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 97% of the 807 members who have rated Telefonica believe the stock will outperform the S&P 500 going forward. These bulls include TrickyFerret78 and All-Star tenmiles, who is ranked in the top 0.05% of our community.

Late last month, TrickyFerret78 succinctly summed up the Telefonica bull case:

Emerging markets, great dividend, low PE, close proximity to EU issues (which I think drags down the stock to our advantage). ... Downside is a lot of debt/leverage. A safe dividend more than makes up for it.

Currently, Telefonica even sports a paltry P/E of 7. That represents a clear discount to other telecom giants like America Movil (15), Vodafone (11), and Verizon (NYSE: VZ  ) (16).

CAPS All-Star tenmiles elaborates on the bargain opportunity:

TEF looks attractive to me ... after recent pullback in part related to the euro debt crisis. Ninety year old company, 100B market cap with dividend yield in excess of 7% (have to pay foreign tax on part if US investor). Company investing heavily in more rapidly growing Latin American regions -- announced 1.5B new investment in Peru. Dividend has seen annual increases for last five years -- likely total return market beater from these levels for those holding over next several years.

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