NEW YORK (TheStreet) -- Shares of American Movil (AMX - Get Report) are up 2.94% to $23.64 on heavy trading volume after it was reported that the company will pay 743 million euros, or $1 billion, to increase its stake in Telekom Austria (TKAGY) to 50.8% after billionaire Carlos Slim agreed to divide up his telecommunications empire in Mexico, according to Bloomberg Businessweek.
TheStreet Ratings team rates AMERICA MOVIL SA DE CV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICA MOVIL SA DE CV (AMX) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for AMERICA MOVIL SA DE CV is rather high; currently it is at 54.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, AMX's net profit margin of 7.10% significantly trails the industry average.
- AMX, with its decline in revenue, slightly underperformed the industry average of 2.5%. Since the same quarter one year prior, revenues slightly dropped by 4.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Wireless Telecommunication Services industry. The net income has significantly decreased by 51.3% when compared to the same quarter one year ago, falling from $2,181.87 million to $1,063.63 million.
- The debt-to-equity ratio is very high at 2.38 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AMX has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: AMX Ratings Report