WCOM is valued the way it is mainly because of it's top line growth (current and future), which is unmatched among the T's and FON's that you suggest it should be compared to.
Yeah, that's the marketing story behind WCOM.
Now lets try some common sense for a change. There are for major telecom carriers. Three of them are slow growers and sell for about twice the revenues, and the forth is a real dynamo sporting a P/S of 7.
Now, imagine that a $8B/year top-line wonder (WCOM) is about to acquire a $26B/year couch potato (MCIC minus its Internet business). One needs not be a rocket scientist to figure out that the revenue growth of the combined company is going to be a lot closer to that of MCIC's than WCOM's. So, why is WCOM and MCIC are going up?
Look at WCOM's pathetic balance sheet. The book value is under $4/share (and how much of this is "good will"?), cash is a whopping 9c/share, profit margin is hair-splitting 0.7% (gotta buy more today:). To top it off, WCOM is about to float a truckload of junk bonds to pay British Telecom for their MCI stake.
Today they beat the estimates by a penny excluding a 4c/share "non-recurring charge"... The good thing about stocks like WCOM is that they have little difficulty making (read: cooking) the numbers.
Good luck, and keep your stops tight,
PTB |
