By J. Royden Ward, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 2/25/10 Sign up for free Cabot Wealth Advisory e-newsletter
A good example of a high-quality company with a low price to earnings growth (PEG) ratio is Atlantic Tele-Network (ATNI). The company has a PEG ratio of 0.51, which is very low. My calculation of ATNI’s PEG ratio is based on the current stock price of 44.15, my 2010 earnings per share estimate of 5.00, and my estimated five-year earnings per share growth rate of 17.3%. Standard & Poor’s Quality Ranking for ATNI is A-, which indicates the company has produced steady earnings and dividend performance during the past five to 10 years.
Atlantic Tele-Network, based in Salem, Massachusetts, is a telecommunications company operating advanced wireless and landline networks and both terrestrial and submarine fiber optics in North America and the Caribbean. The company acquires small telecomm companies and builds additional infrastructure to serve rural communities.
Seven significant acquisitions during the past eight years allow ATNI to provide wireless, local telephone and data, Internet and long distance services in Guyana, Bermuda, the U.S. Virgin Islands, Turks & Caicos and rural areas of the U.S.
Atlantic Tele-Network is ready to complete what is by far its largest acquisition to date. The company will acquire 800,000 Alltel subscribers from Verizon Wireless for $200 million cash. Verizon was required to divest these subscribers to receive approval for the purchase of Alltel. The price being paid by ATNI is very reasonable.
Atlantic Tele-Network’s deal, scheduled to close in March 2010, will triple the company’s sales. The company earned $2.65 per share in 2009 and will likely earn $5.00 in 2010 and $6.25 in 2011. Sales were $246 million in 2009 and should increase to $565 million in 2010 and $700 million in 2011.
Atlantic Tele-Network has increased its dividend every year during the past 12 years. The latest increase brings the dividend yield up to 1.8%. At 8.8 times my 2010 EPS forecast and with a PEG ratio of 0.51, ATNI shares are a bargain.
Editor’s Note: You can read more about PEG ratio analysis in the Cabot Benjamin Graham Value Letter. There you’ll find buy and sell advice for dozens of excellent value stock recommendations from J. Royden Ward each and every month. Roy applies the strategy of the father of value investing, Benjamin Graham, to find the market’s best undervalued stocks. And he will tell you exactly when to sell, too. Roy’s eight sell recommendations during the last four months netted his investors average gains of 36%. Remarkable! Don’t miss out on his next recommendations … click here now to get started today!
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A lifelong investment professional, J. Royden Ward applies his 40 years of investment research, portfolio management, writing and publishing experience to his role as analyst and editor of Cabot Benjamin Graham Value Letter, which is directed to long-term investors seeking a guide to profitable value investing based on the time-tested systems originally developed by Benjamin Graham, the Father of Value Investing. A second-generation disciple of Benjamin Graham, Roy in 1969 pioneered the development of a computerized model that applied the formulas developed by Graham using a unique ranking system. Today, Roy applies his system to two models in the Value Letter.
|Atlantic Tele-Network (ATNI)
10 Derby Square
Salem, Massachusetts 01970
|Index Membership: N/A
Industry: Telecom Services – Foreign
Full Time Employees: 826