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February 03, 2014 – Comments (5) | RELATED TICKERS: T

I will keep it simple, and say that AT&T (NYSE:  T) looks good at this point.  The reasons follow:

P/E = 9.4

P/S = 1.31 and P/B is 1.85

Positive free cash flow with a dividend yield of 5.76%

Earnings growth rate of 57.5% and ROE of 20.80%

Reasonable debt with cheap current and quick ratios

Gross margin is 60% and net margin is 14.2%

What is there not to like? 

5 Comments – Post Your Own

#1) On February 03, 2014 at 6:39 PM, ElCid16 (97.35) wrote:

Yeah - I agree that it's starting to look fairly attractive right here.  Trading around the same prices it was trading in early-2011, yet it's about 700MM shares "leaner" and the dividend is a tad higher.

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#2) On February 03, 2014 at 10:12 PM, ikkyu2 (99.36) wrote:

I don't necessarily know that trading at the same levels as it was in early 2011 is a great pitch to buy the stock, especially after the buyback.  It actually was 29 and had a dividend over 6% when I bought it - in early 2011 - and I'm kind of glad I didn't hold it, because compared to everything else I bought in early 2011, it's kind of been a pig.  

Why would that change now?  What's the catalyst? 

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#3) On February 04, 2014 at 9:10 AM, ThomasPound (84.78) wrote:

The way I see it, T has a target price of $41.  With the dividend, that gives it a margin of error over 33%.  This is based on a average P/E of 20.9, P/S of 1.7 and P/B of 1.8 and ten year growth trends.  It's a safe investment, and should be added to your portfolio.

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#4) On February 04, 2014 at 9:12 AM, ThomasPound (84.78) wrote:

The way I see it, T has a target price of $41.  With the dividend, that gives it a margin of error over 33%.  This is based on a average P/E of 20.9, P/S of 1.7 and P/B of 1.8 and ten year growth trends.  It's a safe investment, and should be added to your portfolio.

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#5) On February 04, 2014 at 11:26 AM, ElCid16 (97.35) wrote:

I don't necessarily know that trading at the same levels as it was in early 2011 is a great pitch to buy the stock, especially after the buyback. 

In 2011, the company had 5.93B shares outstanding.

Right now, the company has 5.23B shares outstanding.

Assuming constant earnings, this represents about a 13% increase in shareholder value.  The reason to purchase the stock now, vs 2011, is because of the buyback.  A decrease in outstanding shares, for a mature company, can be equally as good as an increase in net income.

because compared to everything else I bought in early 2011, it's kind of been a pig.

Are you implying that because T has lagged over the past 3 years, it wouldn't make it a good purchase now?  I'd argue just the opposite.  Because T has lagged over the past 3 years, that could be even more of a reason to purchase now!

Also, I don't necessarily think investors of T are looking for a "catalyst."  This isn't the next BWLD, but investors in utilities should know that.  A purchase right here gets you a 5.7% return from a dividend, plus you get another 2-4% per year value creation through share buybacks - something close to 10% per year, maybe.  With the broader market trading in the high-teen P/E ratio, this has a very good potential to outpace the S&P 500 over the next 2-3 years. 

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