NEW YORK (TheStreet) – No one is going to deny that AT&T (T) - Get Report is a mature company. Growth has slowed over the past couple of years, but the Dow component is one the market's top dividend payers with a yield of 5.20%.

The company's management isn't satisfied with the status quo. It wants to show Wall Street that maturity is not an enemy of growth.

AT&T's $48.5 billion deal for satellite TV provider DirecTV (DTV)  was its first real sign of how serious management has become. Observers are taking a wait-and-see attitude. The company reports second-quarter earnings Wednesday.

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The stock closed Monday at $35.96. Shares are up 2.3% on the year to date. But over the trailing 12 months, AT&T stock has gained only a fraction, trailing the telecom sector's 12% gain. During that same span, both smaller rivals Sprint (S) - Get Report and T-Mobile (TMUS) - Get Report have gained 27% and 29%, respectively.

I would be a buyer here ahead of Wednesday's report. Investors are discounting AT&T in several critical areas -- both on its on merits and on the potential accretive value from DirecTV.

First, on its own, the stock is trading at just 10 times trailing earnings, even though shares are a mere 2.5% away from their 52-week high. When we factor the valuation on fiscal 2015 estimates of $2.75, AT&T shares still trades at a P/E of 13, which is three points below the industry average and one point below Verizon (VZ) - Get Report.

From my vantage point, AT&T is trading on the assumption that it will yield little to no growth. But there are more reasons to own this stock than for its dividend.

With DirecTV coming onboard, I think AT&T can reach $42 sometime in 2015. I say this knowing full-well that the deal still needs to pass regulatory approval. I don't think the market fully appreciates how much scale AT&T can drive across all of its businesses through DirecTV.

Consider, AT&T already sells its U-verse video service as a bundle. Management wants to grow that business and has already targeted 21 new markets where it wants to deliver U-verse using its GigaPower ultra-fast fiber network.

DirecTV not only complements this long-term vision, it can help AT&T grow its base businesses, including its smartphone business, which makes up over 90% of the company's phone sales.

To that end, management deserves credit for its decision to exit the handset subsidy model. It was a questionable decision at first. But it has shown how competitive the company can be given how that decision has reduced the churn rate, which is the metric that tracks customer cancellations.

Combine this with the company's strong wireless-segment and wireless-data business and AT&T will have enough firepower in its core business to avert any price war from Verizon, Sprint and T-Mobile. This is because with DirecTV coming into the fold, AT&T now has a credible partner to help drive higher penetration in both mobile and data through video bundles.

To the extent management can find the right product and price mix, AT&T can drive churn even lower by offering customers across all regions the sort of value combinations they can't be without. It's at that point the market will move the discussion away from "which is the better network" to which company offers the best value. My money is on AT&T.

At the time of publication, the author held no position in any of the stocks mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AT&T INC (T) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $8,799.00 million or 7.31% when compared to the same quarter last year. In addition, AT&T INC has also modestly surpassed the industry average cash flow growth rate of 1.93%.
  • The debt-to-equity ratio is somewhat low, currently at 0.88, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.42 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, AT&T INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.