(By Rich Bieglmeier) Earlier today iStock published its sector performance review
, highlighting sectors and industries with bullish and bearish trends. Since stocks seem determined to move higher, iStock will focus on the buy side of our lists.
To find a stock from our favored sectors, we'll focus on the emerging bull list. As usual, iStock scanned the stock charts, looking for companies that are on the move right now. Then, we compared the fundamental valuations of the movers and shakers. Our motivation is to identify hot stocks, but not pay too much for them.
Of the more than 180 constituents within the emerging bull sectors, iStock found five names that appeal to us.
Alere Inc. (ALR)
Cellcom Israel Ltd. (CEL)
Marathon Oil Corporation (MRO)
MetroPCS Communications, Inc. (PCS)
YPF S.A. (YPF)
iStock wondered if Cellcom Israel Ltd. (CEL) is on the verge of closing its doors after reviewing the fundamental valuations. No, they are not, but the stock price's recent action sure makes it look that way.
Cellcom is the leading Israeli cellular provider; with approximately 3.362 million subscribers. It offers basic and advanced cellular telephone services, text and multimedia messaging services, and advanced cellular content and data services to its customers.
When reviewing CEL's valuations, the first things that jumps off the page is that the company trades with a trailing twelve month (TTM) P/E of 3.75 and a forward P/E of 1.62.
While analysts do expect the company's revenue and earnings to dip in the year ahead, Cellcom's P/E is still at a major discount to the peer group of 13.11. On a price to sales basis (P/S), the company is trading cheaply, too. The average for this industry is 81 cents for every dollar in revenue per share. Meanwhile, Cellcom trades for 37 cents on the dollar.
The mobile telecomm sports margins that are in line with the industry and has an amazing return on equity (ROE) that exceeds 200%, almost unbelievable. Additionally, the company has no difficulty with cash-flow.
With more than $4 per share projected in profits for 2013, CEL should have no problem supporting its dividend on $1.02 per year. That's amazing too, a 16% yield! Heck, the market could struggle to outperform CEL's yield in the next six to 18 months.
According to our view of the company's stock chart, shares may have bottomed out at $6. A continued rise could experience resistance in the $7 neighborhood, but after that, the price should continue up to the 50-day average; which, by the time they meet, should be around $8. In the past 12 months, Cellcom Israel has been as high as $27.96. While iStock would certainly be happy to see the cell phone company return to the top of the mountain, our six to 12 month price target is $9, a potential gain of 35%, which doesn't include the dividend.