Superior Telecom (NYSE: SUT), was recently spun-off from its parent company, Alpine Group(BYSE: AGI) which still controls 50.1% of SUT. From a press release the profile reads as follows: |
Superior TeleCom Inc. is a leading manufacturer and supplier of telecommunications cable and wire products to Regional Bell Operating Companies, independent telephone companies, distributors and systems integrators. It also develops and manufactures voice and data multiplexers and other electronics and signal processing components and systems.
Main bread and butter for SUT is copper based cables. Despite the fact that fiber and wireless are the major trend setters for the basic infrastructure equipment of the telcos of the 90's, apparently there is still growth for plain old copper wire. Superior grew at 12% in the most recent quarter in which the company earned $7.53 mil (0.58/share) on revenues of $122.9 mil. With over $450 mil in annualized revenue, the company is currently valued at ($24/share) less than $290 mil and a PE less than 11 which is close to the growth rate. Does this constitute a value play in the booming telecom industry? The industry is expected to spend a lot of money in upgrading the infrastructure due to the fast increasing competition, thanks to the telecom deregulation law of 1996!
Based on my limited knowledge of this company and the industry, I am rather reluctant to call it a growth stock. But I would definitely call it a value play. Current valuation of the telecom equipment stocks is about 26 times trailing earnings. With a french curve projection of the sales and profits, or even with the status-quo, I expect the stock price to be in the mid 40's in a year. That is at a conservative PE of 17, which is still a discount from the industry average.
One more positive note is that Jeff Vinik's hedge fund owns a 6% stake in the company which they bought at prices ranging from $17-$22! The stock has a little over 12 mil shares outstanding and the float is about 6 mil shares. Perhaps even better value play is the parent company, Alpine Group (AGI) which still owns 50.1% of SUT.
Any one has any opinion on this stock or the industry? All comments are welcome.