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.
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 data by YCharts
3. Telephone and Data Systems, Inc. (TDS)
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%.
- You can view the full analysis from the report here: TDS Ratings Report