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Windstream (NASDAQ:WIN) recently reported second-quarter results that showed total revenue and sales of $1.54 billion. The company reported operating income of $239 million. In the same period last year, it had total revenue of approximately $1 billion.

Although Verizon (NYSE:VZ), AT&T (NYSE:T), and Sprint Nextel (NYSE:S) have more subscribers, I believe Windstream is in a good position and that its share price is significantly undervalued at around $10. I also think that its stock price could rise in the next few years. While many of its rivals are engaged in a cutthroat rivalry over market share, Windstream is reorganizing, and the next few years could be pivotal for the company.

Windstream will be able to grow for several reasons. First, it is restructuring its management organization and simplifying its operating model to better serve customers and make faster and better decisions. Second, the company is on track to achieve $100 million total sales in relation to the Dec. 1, 2011, acquisition of PAETEC. Third, its investment in state-of-the-art data center will attract more business customers to its network. And finally, Windstream strengthened its operations after buying the regional data center and managed data solutions belonging to Hosted Solutions in 2010.

Windstream business service second quarter revenues were $893 million, up 2% from the same period a year ago. Its carrier service revenues were $164 million, an increase of 5% year over year due largely to its fiber-to-the-tower installation and continued demand for additional circuits for wireless back haul services. The current price-to-sales ratio is 1.10, compared to 1.60, 1.13, and 1.13 for AT&T, Verizon, and industry average, respectively. Its price-to-earning ratio is impressive at 33.94, compared to 44.16, 41.74, and 41.20 for AT&T, Verizon, and industry average, respectively. The mean analyst target price for Windstream over the next year is $11.90, and it pays a higher-than-average dividend with a yield of 10.22% . Verizon's yield is half that of Windstream's. Assuming Windstream's acquisitions enable it to make more profits in the next few years, its stock will have to increase in order to catch up with the industry average.

Windstream announced on May 31 that it was reorganizing its management organization. When it is completed in the third quarter, it will result in annualized savings of approximately $30 million to $40 million. Furthermore, Windstream's Carrier Switched Ethernet product will focus on how to make carriers have access to additional markets through regional network-to-network interfaces. As part of this strategy, Windstream provides wholesale carrier access to exchanges across its nationwide network.

Windstream entered the cloud-computing infrastructure services and solution business with the acquisition of Hosted Solutions. It paid $312 million in cash to acquire it, adding five state-of-the-art data centers to its existing portfolio of seven as of 2010. The acquisition made Windstream have a head start over rivals such as CenturyLink. The only knock analysts have on the cloud business is that it hasn't been broken out separately in the financial statements issued by Windstream. Still, I expect that both the sales and earnings-per-share growth will soar as a result of the data center purchase.

Companies in the sector such as Verizon, AT&T, and Frontier (NASDAQ:FTR) don't have the huge demonstration of support from their executives as Windstream's executives have. According to a report, the Windstream executives purchased a huge amount of shares from May 11. For instance, Jeffrey Gardner, president and chief executive officer of Windstream, added 57,250 shares of the company to the previous number of 1,448,359. Allan Wells, a director of the company, has purchased 31,000 shares since May 11, while previously holding 1.4 million shares. Judy Jones, a director of the company, bought shares totaling 42,474 starting from May 14. Michael Rhoda, who serves as a senior vice president of Government Affairs, purchased 2,000 shares on May 11 and currently holds 157,671 shares of the company. Carol Armitage, a director of the company, purchased 500 shares on May 14 and currently holds 39,270 shares of the company. Anthony Thomas, the chief financial officer and treasurer, added 40,356 shares to his 287,840. According to investing legend Peter Lynch, the only reason executives will buy shares in the company they work is the awareness that prices will rise. Professor Nejal Seyhum of the University of Michigan said executives purchased shares in their companies when the stock tended to outperform the total market by 8.9% over the next 12 months.

Windstream is reinventing itself constantly. I prefer to pay up for its shares because its price-to-share ratio is more favorable than AT&T's and Verizon's. Windstream share price is far cheaper than the share prices of its rivals. Only Sprint has a cheaper price, but it is in deep crisis. Windstream rivals such as CenturyLink may have overtaken it in cloud computing infrastructure, but it will even the score after it has reorganized itself.

Windstream seems positioned to sustain its dividend payment and consider additional shareholder-friendly activities over time. I believe that the company is a story that bears watching because it is constantly positioning itself to be more competitive than rivals, such as CenturyLink. For instance, while CenturyLink boasts a 6.92 dividend yield, Windstream's yield is 10.22.

Given all this, I believe at current price, Windstream's stock is a solid investment with the strong possibility for solid growth in the next few years. Investors wise enough to spot a good deal should consider buying it. Of course, Verizon and AT&T have far more subscribers, but Windstream is catching up. What makes Windstream even more enticing is that it trades at a reasonable valuation. Its executives are buying its shares in large numbers, and it pays subscribers better-than-average yields.

Source: Today's Low-Priced Winning Pick: Windstream