I’m Sweet on DIRECTV (DTV) for Valentine’s Day

For the full year, though, things are looking even brighter than originally forecasted. Because of the higher revenue per unit in the U.S. and the substantial subscriber growth in Latin America, the company is expecting greater free cash flow than initially guided and double-digit consolidated growth.

With all of this in mind, I would like to reiterate a strong buy on DirecTV stock, especially when compared with its peers.

Value and growth
DirecTV, in my opinion, is outperforming given the enormous capital outlay it must make in Latin America to build out its businesses. As these investments mature, I expect margins to expand and free cash flow to continue its rise. The company is investigating a broadband service in Latin America, which could provide even further shareholder value in future years.

With a forward one-year P/E ratio of 12, the company is on the less expensive side, though not a bargain. However, I believe the double-digit growth in Latin America and mid- to high-single-digit growth in the U.S. warrant a higher ratio. DISH, which cannot boast near the subscriber growth and has poured billions into a risky spectrum race, trades much higher at 16 times forward earnings. With a simple multiple correction, and not taking into account the earnings growth, I believe DirecTV could be worth somewhere in the ballpark of $65 to $70, or a 20% to 25% premium to today’s stock price. As always, invest only in companiess you understand and that are appropriate for your risk profile.

The article I’m Sweet on This Stock for Valentine’s Day originally appeared on Fool.com and is written by Michael B. Lewis.

Fool contributor Michael B. Lewis and The Motley Fool have no position in any of the stocks mentioned.

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