Trading Ideas: Windstream Corporation (WIN) A BIG WINner
Windstream Corporation (WIN) is a rural telecom provider which offers landline, wireless, high speed internet, and video services.
In early-May, the company reported strong first-quarter profits as they grew 24% over last year. EPS came in at 27 cents which was an 8% surprise. Sales ticked up 4% over last year as well. Expenses fell and the company added about 40,000 broadband customers.
Our more conservative investors will love the fat dividend yield of 7.5%. This is made possible by its robust operating cash flow of over $1 billion. WIN’s payout ratio has been growing, which is a great sign for shareholders. Its huge profit margin of over 28% also caught our eye.
Looking forward, the broadband market seems to be a big growth driver for the company. As already mentioned, it added 40,000 broadband customers, which represented 22% growth over last year. The good news is that broadband penetration is only 29%, so there is plenty of room for further growth.
The stock’s valuation is compelling as it is only trading for 11.9x 2008 estimates of $1.07 per share. Those estimates have increased by 7% over the past 90 days. WIN has exceeded estimates for the past four quarters by an average of 12.9%. We see this stock trading north of $15 in a year.
Suggested Stop: $11.40
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