Rating Change #7
Telecom Argentina SA (TEO) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 4.3%. Since the same quarter one year prior, revenues rose by 14.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Telecommunication Services industry average. The net income increased by 2.6% when compared to the same quarter one year prior, going from $155.43 million to $159.48 million.
- TEO's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 55.25%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it 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.
- The gross profit margin for TELECOM ARGENTINA STET-FRNCE is currently lower than what is desirable, coming in at 32.10%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 13.60% is above that of the industry average.