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Investopedia Advisor submits: Sprint Nextel (NYSE:S) continues to frustrate its long-suffering shareholders. But now is not the time to follow them to the exits. The stock is priced for value investors willing to wait for a turnaround.

The shares are down 15% since Sprint Nextel delivered second quarter earnings and cut guidance. Now at a two year low, the shares are down almost 30% since Sprint announced its merger with Nextel at the end of 2004.

The shares have fallen far enough. At $16.62, the stock is priced at a ridiculously-low 6 times 2007 free cash flow and offers a whopping 10% free cash flow yield. Priced any lower, Sprint Nextel’s free cash flow will make it an eye-catching takeover target.

With annual free cash flow of $5 billion expected for 2006 and 2007, Sprint Nextel has plenty of room to make good on its promise to buy back $6 billion worth of shares. Buybacks over the next 18 months will shrink the company’s share count by 12%, boosting value per share.

What’s more, Sprint Nextel shares trade at a big discount to AT&T, despite AT&T’s lower growth businesses. Sprint is priced at a mere 4 times EBITDA, while AT&T trades at more than 7 times.

Of course, with few short-term catalysts available to ignite them, Sprint Nextel shares could be dead money for some time. But, long-term investors should not write-off a turnaround. Patience will pay-off.

S 1-year chart:

By Ben McClure, Contributor - Investopedia Advisor

At the time of release Ben McClure did not own any shares in any of the companies mentioned in this article.

Source: Sprint Nextel: All You Need is Patience