TSC Ratings' Upgrades: America Movil

The following ratings changes were generated on Wednesday, Oct. 8.

We downgraded America Movil(AMX Quote), a wireless communications provider in Latin America, from buy to hold. It exhibits robust revenue growth, notable return on equity and growth in earnings per share, but weaknesses include poor debt management and a generally disappointing stock performance.

At 19% year over year, revenue growth came in higher than the industry average of 6.3%, helping to boost EPS by 25% to $3.06 in the most recent quarter compared with $2.24 a year ago. The company's two-year positive pattern of EPS growth should continue, suggesting improvement in business performance. This year, the market expects further improvement to $3.66. The gross profit margin for America Movil is rather high at 58.5%, having increased from the same quarter the previous year. However, the net profit margin of 20.8% trails the industry average.

The company's debt-to-equity ratio of 0.68 is somewhat low overall but is high when compared with the industry average, implying that the management of the debt levels should be evaluated further. The company's quick ratio of 0.39 is very low, demonstrating very weak liquidity. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter, and shares are down by 45.76% on the year, underperforming the S&P 500. Naturally, the overall market trend is bound to be a significant factor. The stock's sharp decline could be a positive for future investors, making America Movil cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.