Lumos Networks (LMOS) has been a poor performer since it came public in October 2011 at around $15 a share. This busted IPO now sells at under $8 a share. However, the stock looks like it is trying to bottom, pays a huge dividend and has some other recent catalysts. Value and income investors should take a hard look at the shares at these levels.
Recent positives for LMOS:
- DA Davidson upgraded the shares to a "Buy" and put an $11 price target on the shares.
- Insiders have been net buyers of shares since the second quarter of this year.
- Technically, the stock looks like it has built a bottom at these levels (See Chart).
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Lumos Networks Corp provides fiber-based network services in the Mid-Atlantic region. The company serves a range of customers, including telecommunication carriers, enterprises, and other business customers and residential customers
4 additional reasons LMOS is solid play for income investors at under $8 a share:
- The stock yields a robust 7.1%.
- LMOS is cheap at under 9 times forward earnings and analysts expect revenue growth to resume in FY2013 after a slight decline in FY2012.
- Net income has been positive the last two quarters. More importantly, the company has delivered between $15mm to $24mm in operating cash flow each of the last three quarters (The company has an under $500mm enterprise value including debt to put that in perspective).
- LMOS is selling at just 82% of sales which is near the bottom of its historical range based on that metric. It is also a substantial discount to other competitive and Rural Local Exchange Carrier's (RLEC) like CenturyLink (CTL) which has a P/S ratio of 1.34.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LMOS over the next 72 hours.
