I want to talk about a company that garners very little attention from the general business press. It's one of those unpretentious firms that goes about its business quietly, competently, and efficiently.
It is a company whose:
- Return on invested capital is 21.7% for the trailing 12 months, and with a ROIC of not less than 14.2% since 2004.
- Revenues have increased by 26% for the first six months of this year over the same period in 2010.
- Operating income has increased 52% over those same six months.
- Net profit margin has increased 18% over that period.
The company in question is ADTRAN
Now that you bought it, what do you do with it?
Frontier made news in 2010 when it acquired 14 states' worth of land-line telephone operations from Verizon Communication
Verizon, it turns out, had neglected its operations in those states, which caused the "Can You Hear Me Now?" carrier to quickly lose customers, only 60% of whom had access to broadband services, compared to the 92% of Frontier customers who did.
Whom do you call?
It seems that Frontier had bought a fixer-upper, and it needed to roll up its sleeves and do the things that needed to be done to get those customers back. One of those things was to modernize the old Verizon networks.
For this, Frontier brought in ADTRAN for a makeover of its newly acquired infrastructure. This past July, it awarded ADTRAN a three-year contract to bring high-speed Internet service to at least 85% of the customers it acquired from Verizon. Frontier can't afford any slip-ups here because it must gain, not lose, to meet its debt obligations and keep its dividend-loving investors satisfied. ADTRAN may be the perfectly positioned company to take on this task. It has a reputation for providing low-cost equipment with superior customer service.
As an investment, though, ADTRAN does bring one particular concern: Almost half of its 2010 revenues came from just three customers -- AT&T
The earlier caveat aside, I think this is a good company to invest in (it even brings a 1.4% yield with it), and I'm going to put my CAPS score where my mouth is and give it a thumbs-up. If you're not yet a member of CAPS, sign up for free to take advantage of the investing experience the community brings.
Fool contributor Dan Radovsky owns shares of AT&T and Frontier Communications. Motley Fool newsletter services have recommended buying shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.