Partner Communications Company Ltd (ADR) (PTNR)

"The Company operates a mobile telecommunications network in Israel."

Sales grew about 17% last year and are growing at the same annual rate so far this year. EPS more than doubled last year and are growing at about a 20% annual rate so far this year. The pretax profit margin has fluctuated between 12% and 19% over the past 4 years, so no clear signal is given by this fluctuating performance. The EPS/book value (% earned on equity) has risen in each of the past two years. The debt-to-equity ratio has varied greatly over the past 4 years, and according to Yahoo! now stands at about 137%. This is a decrease from last year and a huge drop from the year before but is still higher than I would like it to be. However, since the debt-to-equity ratio dropped from 330% in 2005, the trend is in the right direction and they have made huge strides to pay down their debt, so this is a positive sign. The current P/E ratio is considerably above their 4-year trailing average, which is bad, and is in fact higher than it reached in 3 of the past 4 years, which is very bad. While some P/E increase could be justified by the declining debt levels, I think this might be excessive, so the stock might be overbought at this time. The current payout ratio is about 52%, which is fairly reasonable, so their dividend, currently yielding a very nice 4.6% according to Yahoo!, should be secure. (Interestingly, TDAmeritrade states their dividend yield is 6% while S&P states it is 3.44%, so 4.6% seems to be the average of the three estimates.) The trailing PEG ratio is a very reasonable 0.80, so that is good. The trailing averages signal on this stock is very bullish, with a strong divergence between the 50-day and 200-day moving averages and a strong divergence between these averages and the S&P500. The MACD signal is bullish. Interestingly, Yahoo! says that no analyst they cover is rating this stock but they say the analyst opinion on this stock is a strong buy. Not sure how that works, but I know other analysts have also rated this stock a buy.

Due to the current strong performance and the very nice dividend yield, I am keeping this stock. However, since my data suggests that this stock is fairly valued at this point, I will not reiterate my outperform rating at this time. While I think that the stock will outperform the S&P500 over the next year, I am not so confident that it will do so over the 5-year time horizon that I look at, which is what I base my outperform calls on. Therefore, while I think this stock is well worth holding, (for both the stock appreciation potential and the very nice dividend), I will not reiterate my outperform rating on this stock at this time.