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Residing in Colorado Springs, Colorado. Has been trading and coaching using a self-developed option trading system for 10 years. Philosophically conservative, accurately trades weekly options with a strong risk management approach. Well sought after by investors around the world, he teaches a... More
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  • CenturyLink (CTL) A Valued but Stagnant Stock 2 comments
    Jun 30, 2010 8:43 PM | about stocks: CTL

    CenturyLink, Inc. (NYSE:CTL)

    Sector: Technology

    Industry: Telecom Services Domestic

    CenturyLink, Inc., together with its subsidiaries, operates as an integrated communications company. The company provides a range of communications services, including local and long distance voice, wholesale network access, high-speed Internet access, other data services, and video services in the continental United States. Its services include local exchange and long distance voice telephone services, as well as enhanced voice services, such as call forwarding, conference calling, caller identification, selective call ringing, and call waiting; network access services; data services, including high-speed Internet access services, and data transmission services over special circuits and private lines

    How valuable is the Stock?

    When we think about value we have to think about the potential growth. How much potential? Something called the price to sales ratio gives us the best indicator of this. The lower the price/sales ratio, the healthier it is. If we compare ARCC to its industry, we find a mind-blowing embryonic possibility to sprout and grow. The industry comes in with an 2.77 ratio while CTL stands at 2.53. Next, we want to askhow much money is flowing through this company as compared to its price. This is called the price to cash flow ratio. The closer the ratio gets to that magical “100” the less capability a company has. “100” means it can just pay its bills because the value of the company is equal to the amount of money coming in and no more. The industry stands at 15.90 while CTL shows off two thirds of that, coming in at 9.90. We have an abundance of upside potential compared to the industry as a whole. The price to earnings ratio (P/E Ratio) is also lower coming in at (14.6 to 17.8) this is about 18% lower and looking healthyOur conclusion- this is still highly under valued! We give it an “A-”

    How profitable is the Company?

    If a company has a good sales force and the money is flowing, that is a possible good sign for an investment. But alone, this is not good. What if a company brings in money but then spends it as fast as it brings it in? “How much money is left over from a sale after you pay all your costs to make that sale?” This is called the gross margin. Comparing the industry to CTL, the industry comes in at 57.80%, while CTL’s gross margin is 65.2%. This is a modest 12% higher than the industry—nothing to boast but consistently a little better. ! “How good is the company at controlling its costs?” This is sometimes referred to as the net profit margin. If we divide the net profit by net revenues we come up with a %. The higher the % the better at money management the company is. The industry’s net profit margin is 11.3%. CTL comes in at 11.40%! Average! Our Conclusion- this company is average prodding along with the industry. We give it a “B-”

    How good is the Management team?

    One thing we really like about CTL is its Inventory Turnover Ratio this last year. A ratio showing how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies strong sales. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall. CTL had a Inventory Turnover ratio of a near perfect 93.3% while the industry as a whole was 13.8% on average. They were doing something right!

    How well is the Company growing?

    With every business we want to know if they are growing. Why would we put money into a business that is not growing? The best way to understand if a company is growing is to compare it to the industry as a whole. Since CTL is part of Telecom Services Domestic, that is what we will compare it to. And what a wild year it had! Sales year of year was mind-boggling for CTL Their sales grew at an unbelievable 182.9% while 
    the industry as a whole was a somber 7.2%Over a 5 year period, they have been average right along side the industry in sales and net income, but last year they really exploded.

    Technical Analysis AAA

    Long Term Investing

    When we look at the long term chart on CTL we do not see much happening right now. Last year as an incredible run but this year we have been moving continually sideways in a very tight trading zone. But we do have a slight down ward trend in place, even so slight. We are not looking for this to move up at any real pace. We lost 10% in value the last half of April but we then picked up most of that back here, so no real movement going on here.

    Disclosure: No Position
    Themes: Technology Stocks: CTL
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Comments (2)
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  • patrick9988
    , contributor
    Comment (1) | Send Message
     
    Well John in retrospect you were dead wrong. CTL has had an excellent move since you provided this incorrect analysis.
    PC
    9/17/10
    17 Sep 2010, 10:47 PM Reply Like
  • John Mylant
    , contributor
    Comments (284) | Send Message
     
    Author’s reply » Your 90 days late on your comment my friend. This article was written the beginning of Summer. Your comment is almost October.
    21 Oct 2011, 10:04 PM Reply Like
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