On the surface of things, a company with a name like VimpelCom
VimpelCom put up a 78% increase in revenues for the fourth quarter, topping off a 73% increase for the year, which saw sales reach $1.3 billion. Earnings per share (actually, U.S. Depositary Shares, as expressed here) were up 70% for the quarter. Full-year EPS of $4.59 represented 79% growth over 2002's tally.
That means you can get shares for somewhere around 20 times trailing earnings. Is that a bargain? Maybe. Quick-moving stocks commonly command P/E ratios much higher than their growth rates, and VimpelCom's trailing P/E is about one quarter of its earnings growth. Of course, today's price represents a measure of future potential, and that's where things get cloudier. Analysts expect earnings near $6 per share for 2005. But can the company continue to shoot skyward like Jack's beanstalk?
The firm built this year's gains on a 122% increase in subscribers. The most explosive growth came from regions outside VimpelCom's urban base, Moscow.
In case you haven't looked, Russia is big. Really, really big. According to the Fool's resident Russia expert, Rich Smith, infrastructure is still in need of improvement -- to put it charitably. To get a landline, consumers endure high prices and long waits. Traditional providers would need to make billions in investment to meet the market. In this climate, mobile phones offer an obvious alternative for Russian consumers, as they do in other emerging economies, like China. That could power a lot of new growth for VimpelCom.
Of course, the mobile firm is not immune from infrastructure investments, and indeed capital expenditures have eaten up the firm's operating cash for several years. But if VimpelCom can leverage new networks and continue signing up customers, free cash flow may soon follow.
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