Current shareholders should continue to hold Sprint (NYSE:S) long-term, and interested investors may consider initiating a position in the near-term. Sprint's stock has had strong growth in 2012, and it is available at a significant discount in comparison to its peers in the wireless industry. The wireless carrier also has made headway on its 4G LTE network, iPhone assimilation, and divesting the Nextel platform while recapturing the subscriber base. Sprint has two deals on the horizon that could vastly improve the firm's long-term outlook in the near term as well.
AT&T (NYSE:T), Verizon (NYSE:VZ), MetroPCS (PCS), and Clearwire (CLWR) are the firms in the wireless communications industry that are most comparable to Sprint. Sprint's 0.49 price-to-sales ratio is the lowest among the firms. Sprint's price is around 2.01 times its book value. MetroPCS's 1.18 price-to-book ratio is the lowest among the firms. Sprint's current ratio is around 1.46, and its debt-to-equity ratio is around 2.51. Clearwire's 4.37 debt-to-equity ratio is the highest among these firms. Sprint's annualized dividend is around $0.10 per share. Sprint's sales have declined 3.8% over the past five years. Clearwire's 65.7% sales growth over the past five years is the highest among the firms.
Sprint's EPS is around -$1.44; it's increased 16.7% in 2012 and is projected to increase 44.5% in 2013. Verizon's $1.07 EPS is the highest among the firms. Sprint's ROE is around -40%, its operating margin is -4.4% and its profit margin is around -12.8%. Sprint's float short is around 2.3%, and its 0.86 short ratio is the lowest among the firms. AT&T's 0.85% float short is the lowest among the firms. Sprint's 1.13 beta and 79.9 average trading volume are the highest among the firms. Its relative volume is around 0.52. Sprint's stock has increased around 143.6% YTD. It's increased 16.3% over the past month and has increased around 0.1% since its last earnings release.
On Sprint's recent earnings report, third quarter net operating revenues totaled $8.76 billion, increasing 5% YOY. Sprint realized a third quarter $231 million operating loss opposed to $208 million operating income YOY. Sprint's third quarter 2012 net loss totaled $767 million, down from a net loss of $301 million YOY. Third quarter capital expenditures totaled $1.48 billion, increasing 96% YOY. The increase in capital expenditures was primarily due to the $1.1 billion investment in Network Vision. Third quarter 2012 net cash provided by operating activities totaled $628 million, increasing 3% YOY. Sprint's free cash flow was -$487 million, down 78% YOY. Sprint's total debt at the end of nine months 2012 was $21.30 billion, increasing from $20.27 billion at the end of 2011.
Third quarter net operating revenues improved primarily due to the increase in wireless service and equipment revenues; revenue growth was partially offset by reduced wireline revenues. Sprint had its best third quarter for churn: Sprint's postpaid churn was 1.88%, and its prepaid churn was 2.93%. Sprint's iPhone sales totaled 1.5 million, 40% went to new customers. Sprint had over 1 million LTE smartphones sold in the quarter before the iPhone 5 launch. Sprint's third quarter wireless retail service revenues totaled $7.2 billion, increasing 5% YOY. Third quarter net wireless operating expenses totaled $8.3 billion, increasing from $7.4 billion YOY. Third quarter postpaid ARPU averaged $61.18, increasing from $60.88 sequentially and $57.65 YOY.
Sprint's postpaid subscriber base realized its tenth consecutive quarter of growth; third quarter net additions totaled 410,000 on the back of a 59% recapture rate. Sprint's shutdown of the Nextel platform is still on track for mid-2013. Sprint's 4G LTE network currently spans 32 cities, the firm projects an additional 115 in the near to mid-term. The firm currently has construction underway in over 200 cities and 13,500 gas sites ready for construction. Third quarter construction starts per week increased 250% compared to the previous quarter. Third quarter wireline revenues totaled $939 million, declining 6% sequentially and 12% YOY; net operating expenses totaled $887 million, decreasing 7% sequentially and 10% YOY.
In mid-October, Sprint announced it had purchased a stake from Clearwire's founder, thus making Sprint the majority shareholder. Clearwire's stock declined 8% as it became apparent that Sprint would not attempt to buy Clearwire outright. The deal gave Sprint 50.8% stake in Clearwire just a week after it agreed to sell 70% of itself to Softbank (OTCPK:SFTBF) for $20 billion. Clearwire's spectrum is a critical asset for Sprint as the firm is currently focused on expanding its 4G LTE network.
Some analysts expect the firm to buy Clearwire once Softbank and Sprint consummate their deal. But, taking on Clearwire's debt could create a much worst financial horizon for Sprint than it already faces. Meanwhile, some Clearwire shareholders are pushing for the firm to sell its unused spectrum that could bring in $6 to $9 billion and ward off a takeover by Sprint. Otherwise, if the Softbank deal closes, Sprint may be in position to acquire Clearwire and its spectrum at a significant discount.
On Sprint's third quarter earnings call, management provided more details on the firm's current operations and near-term outlook. Sprint's prepaid churn reached 3.37%, the fifteenth consecutive quarter of YOY improvement. Sprint recaptured 55% of the postpaid base leaving Nextel, this is double the rate previously achieved by the firm. The iPhone 5 is essential because it brings new customers to Sprint; reining in the fourth consecutive quarter meeting or surpassing 40%.
The success in improving its recapture rate of Nextel customers, growing its 4G LTE Network Vision, improving churn rates and the potential Clearwire acquisition along with the cash generated in the Softbank agreement are all reasons for interested investors to be bullish on Sprint for the near-term. Sprint's low stock price and strong growth in 2012 underscores its potential for capital appreciation in the near term if its operations remain successful.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.