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"We rate TIM PARTICIPACOES SA (TSU) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 60.9%. Since the same quarter one year prior, revenues slightly increased by 8.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.43, which illustrates the ability to avoid short-term cash problems.
- Compared to its closing price of one year ago, TSU's share price has jumped by 26.90%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- TIM PARTICIPACOES SA reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TIM PARTICIPACOES SA reported lower earnings of $1.32 versus $1.48 in the prior year. This year, the market expects an improvement in earnings ($1.36 versus $1.32).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Wireless Telecommunication Services industry average, but is greater than that of the S&P 500. The net income increased by 4.9% when compared to the same quarter one year prior, going from $161.86 million to $169.87 million.
- You can view the full analysis from the report here: TSU Ratings Report