Mobile Telesystems (MBT) Downgraded From Buy to Hold

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NEW YORK (TheStreet) -- Mobile Telesystems  (MBT) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C.  TheStreet Ratings Team has this to say about their recommendation:

"We rate MOBILE TELESYSTEMS OJSC (MBT) 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 revenue growth, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself."

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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 9.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MOBILE TELESYSTEMS OJSC's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MOBILE TELESYSTEMS OJSC increased its bottom line by earning $2.34 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($67.50 versus $2.34).
  • Looking at the price performance of MBT's shares over the past 12 months, there is not much good news to report: the stock is down 38.28%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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 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 25.1% when compared to the same quarter one year ago, falling from $861.38 million to $645.09 million.

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