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Sprint Nextel Corporation (NYSE:S), the third largest telecom operator after AT&T Inc. (NYSE:T) and Verizon Communication (NYSE:VZ), is fast transforming itself from being a struggling telecom company into a stock many value investors now consider a compelling buy. Less than a year ago, Sprint was heavily weighed down by negative financial metrics because its valuation was very unattractive - to the extent that some analysts predicted that the stock might be a 100 percent loss for its shareholders.

Sprint was drowning under the heavy burden of its debt issues, but the company pulled back from the brink of doom. Sprint is re-strategizing and executing using a combination of innovations, such as strategic debt refinancing, aided by the current low interest rate regime, introduction of high-end smartphones like Apple's (NASDAQ:AAPL) iPhone on its prepaid billings, and the offer of unlimited data plans.

In addition to these progressive turnaround strategies, Sprint's CEO, Dan Hesse, recently indicated at a Goldman Sachs conference that Sprint was working to be a major player in the expected merger and acquisition plan within the telecom industry, which he claimed was ripe for considerable business consolidation. Expectedly, the shares of Sprint have rallied.

As of late September, the stock had gained about 48% over the price per stock it recorded early May - which is almost double in price appreciation. Though the profits haven't started materializing yet, I believe that investors will start to see the positive figures in the next few quarters. That leads us to the pertinent question: What does the future hold for Sprint?

Analysts' Ratings

Sprint has recorded positive valuation, and many notable research analysts like those at FBR Capital, Wells Fargo & Company, Pacific Crest, and analysts at Macquarie have placed an ''outperform'' rating on Sprint and individually raised their price targets on its stock to be within the range of $6 and $7 per share.

A Look at Sprint's Earnings and Outlook

A look at Sprint's earnings from 2007 till date shows that it has peaked and troughed in revenue generation. In its 2007 financials, Sprint grossed $41 billion in earnings, but that declined to $32.26 billion in 2009, largely because its 2007 earnings were due to gains made from the acquisition of its former affiliates. In 2010 and 2011, Sprint grew its earnings incrementally by 3.4% compared to AT&T's 2%, but its growth was impacted by Nextel.

In the first quarter of 2012, Sprint improved its growth rate from 3.4% in 2011 to 4.8% while AT&T saw a decline of 0.2% - AT&T's earnings dropped from 2% to 1.8% during the corresponding year-over-year period. Also, Sprint grew its second quarter earnings and exceeded that of AT&T on percentage basis, as well as Verizon's earnings growth rate.

Though AT&T currently leads Verizon and Sprint on iPhone 5 pre-order sales, which should translate to higher revenues for AT&T, I believe that Sprint's offer of unlimited data and text package at $79.99 per month is a very attractive deal that can improve its subscriber base considerably, even attracting users of other brands of smartphones.

In addition, Sprint has been making significant progress on its 4G LTE network expansion, which assures that it can grow its earnings further because of its revenue history in wholesale and prepaid services. Besides, Sprint is also gaining momentum with the sales of its Samsung, HTC, and LG products apart from Apple's iPhone.

With the level of progress Sprint has been making in expanding its services and gaining more subscribers, I believe that the company can improve on its earnings and generate enough cash flow to support its operations. Therefore, it should be able to announce profits a few quarters from now and pay dividends, which will further improve its share price value.

I'm enthusiastic about Sprint and I recommend it to value investors. I consider the stock a good buy because of its earnings potential and anticipated price appreciation.

Source: What Does The Future Hold For Sprint?