NEW YORK (TheStreet) -- T-Mobile US (TMUS) and DISH Network Corporation (DISH) are reportedly in talks to merge, adding yet more froth to the already-active telecom space. The report comes on the heels of the merger proposal of AT&T  (T) and DirecTV (DTV), which is being viewed as very possible.

AT&T is so determined to get the proposed merger with DirecTV done that it's willing to accept the FCC's net neutrality rules. The analyst community views the AT&T and DirecTV merger positively.

With the potential merger between T-Mobile and DISH, we decided to check Quant Ratings to see what other wireless telecommunication services would be good investments. Although T-Mobile and DISH are both in Quant's "buy category," there are other  companies in the sub-sector that are worth a closer look.

Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which wireless telecommunication services companies made the list. And when you're done, be sure to read about which biotech companies to buy now. Year-to-date returns are based on June 4, 2015, closing prices. The highest-rated stock appears last.

TDS ChartTDS data by YCharts
3. Telephone and Data Systems, Inc. (TDS)

Rating: B-

Market Cap: $3.2 billion
Year-to-date return: 18.9%

Telephone and Data Systems, Inc., a telecommunications company, provides wireless, wireline, cable, and hosted and managed services in the United States.

"We rate TELEPHONE & DATA SYSTEMS INC (TDS) a BUY. This is driven by multiple strengths, 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 increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and good cash flow from operations. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 698.4% when compared to the same quarter one year prior, rising from $18.25 million to $145.74 million.
  • The revenue growth significantly trails the industry average of 56.3%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.49, 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 1.22, which illustrates the ability to avoid short-term cash problems.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • Net operating cash flow has significantly increased by 238.58% to $355.31 million when compared to the same quarter last year. In addition, TELEPHONE & DATA SYSTEMS INC has also vastly surpassed the industry average cash flow growth rate of -37.17%.

SPOK ChartSPOK data by YCharts
2. Spok Holdings, Inc. (SPOK)

Rating: B

Market Cap: $367 million
Year-to-date return: -3.7%

Spok Holdings, Inc., through its subsidiary, Spok Inc, provides various communications solutions to healthcare, government, public safety, and other industries in the United States, Europe, Australia, Asia, and the Middle East.

"We rate SPOK HOLDINGS INC (SPOK) a BUY. This is driven by a few notable strengths, 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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."

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

  • SPOK's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.93, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for SPOK HOLDINGS INC is rather high; currently it is at 58.31%. Regardless of SPOK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.13% trails the industry average.
  • The revenue fell significantly faster than the industry average of 56.3%. Since the same quarter one year prior, revenues slightly dropped by 4.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The change in net income from the same quarter one year ago has significantly exceeded that of the Wireless Telecommunication Services industry average, but is less than that of the S&P 500. The net income has decreased by 19.9% when compared to the same quarter one year ago, dropping from $4.89 million to $3.92 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

SHEN ChartSHEN data by YCharts
1. Shenandoah Telecommunications Company (SHEN)

Rating: B+

Market Cap: $769.4 million
Year-to-date return: 1.8%

Shenandoah Telecommunications Company, through its subsidiaries, provides regulated and unregulated telecommunications services to end-user customers and other telecommunications providers in Virginia, West Virginia, central Pennsylvania, and western Maryland.

"We rate SHENANDOAH TELECOMMUN CO (SHEN) 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 impressive record of earnings per share growth, compelling growth in net income, revenue growth, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

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

  • SHENANDOAH TELECOMMUN CO has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SHENANDOAH TELECOMMUN CO increased its bottom line by earning $1.39 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $1.39).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Wireless Telecommunication Services industry. The net income increased by 19.4% when compared to the same quarter one year prior, going from $8.62 million to $10.29 million.
  • The revenue growth significantly trails the industry average of 56.3%. Since the same quarter one year prior, revenues slightly increased by 4.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for SHENANDOAH TELECOMMUN CO is rather high; currently it is at 63.59%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.20% trails the industry average.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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