Skip to main content

Millicom (MICC) - more growth on the way

Millicom International Cellular S.A. (MICC) provides cell phone service worldwide, especially in developing countries. Headquartered in Luxembourg, Millicom focuses on offering prepaid cell phone services across 15 countries including El Salvador in Central America; Paraguay in South America; Chad, Ghana, and Tanzania in Africa; Sri Lanka in south Asia; and Cambodia and Laos in Southeast Asia. These may not be on the top of your list of vacation spots but they are rapidly growing markets for cell phones. Rather than spending millions to deploy land lines, why not install some towers and sell prepaid cards and cell phones? Millicom has developed a sweet business model.

How good is their business model? How about quarterly revenue growth of 85% year-over-year, gross margin at 72.5% and operating margin at 27.8% and return on equity of 61%? This kind of growth is only available in emerging markets and that is the specialty of Millicom. Whereas cell phone penetration in places like the US and Europe ranges from 70% to 100%, only three out of ten people in developing countries has a cell phone. Clearly, there is room for further growth.

So is there a down side? Well, Millicom has a high trailing PE ratio, over 48; however, the forward PE is only about 16 so strong growth is expected. It can be a volatile stock: it sports a beta of about 5.25, good for traders but nerve wracking for buy-and-hold investors. On the other hand, there has been a solid up-trend in place since last July and, though the stock has bounced around some, it has basically stayed above its 20, 50 and 200 day moving averages pretty much the the whole time. Take a look at the chart below.




Click chart to view larger image


In summary, Millicom is taking advantage of a red-hot global trend. The rapid adoption of mobile phones in developing markets is aided by favorable demographics. These markets teem with teenagers and no age group has taken to mobile phones more than those who are under 25. Millicom's competitors are justifiably jealous. China Mobile attempted to buy them out last year but the deal fell through because China Mobile wouldn't offer what Millicom's management felt was a reasonable price. Last quarter's blowout numbers prove that premium valuation was well deserved. Look for Millicom to continue its winning ways.

Note: In looking for a stock that would qualify for the CNBC Million Dollar Portfolio contest I turned to the Zacks stock screener (find links to this and other screeners on the Trade Radar Investor Toolbox page). I set up a simple search for stocks with a market cap over $500M and a beta over 5. The high beta was chosen in the hopes that the corresponding volatility will be on the upside. Of the half dozen stocks that popped out I felt that the one with the most potential was Millicom.

Comments

Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:


Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:


Results here were actually quite good and, to make things even better, the previous month was revised upward.

N…

Alert HQ has moved!

End of an era!

This site was started way back in 2006/2007 to showcase my blog posts and the Alert HQ buy signals and sell signals. Alert HQ grew to include other kinds of stock alerts including Swing Signals, Trend Busters, Trend Leaders, Cash Flow Kings and more.

In the meantime, I built a sister site, TradingStockAlerts.com and I started using some of the same Alert HQ content over there. As a result, I am discontinuing the Alert HQ data here at Trade-Radar.com

The good news, however, is that all the Alert HQ signals and stock screens are still completely free. In addition, the pages have been enhanced so that you can hover over a stock symbol and a small chart will pop up so you can get a quick look at the stock's recent price action. If you click on a symbol it will take you to a page with plenty of financial and technical analysis information (still free!) as well as a larger chart that you can play with in terms of adding or deleting indicators, moving averages, etc.

Click …