America Movil SAB de CV (ADR) (AMX), Telefonica S.A. (ADR) (TEF): Is NII Holdings, Inc. (NIHD) Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does NII Holdings, Inc. (NASDAQ:NIHD) fit the bill? Let’s look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell NII Holdings, Inc. (NASDAQ:NIHD)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s look at NII Holdings, Inc. (NASDAQ:NIHD)’s key statistics:

NIHD Total Return Price data by YCharts

Passing Criteria	3-Year* Change	Grade
Revenue growth > 30%	12.4%	Fail
Improving profit margin	(493.8%)	Fail
Free cash flow growth > Net income growth	(359.5%) vs. (542.6%)	Pass
Improving EPS	(540.5%)	Fail
Stock growth (+ 15%) < EPS growth	(80.57%) vs. (540.5%)	Fail

Source: YCharts.
*Period begins at end of Q2 2010.

NIHD Return on Equity data by YCharts

Passing Criteria	3-Year* Change	Grade
Improving return on equity	(597.5%)	Fail
Declining debt to equity	206.2%	Fail

Source: YCharts.
*Period begins at end of Q2 2010. 

How we got here and where we’re going
NII fell on its face today, as it earned only one out of seven possible passing grades, and even that lone pass was just a technicality. Weak revenue growth and falling margins have impeded NII Holdings, Inc. (NASDAQ:NIHD)’s success. Will NII be able to move past these weaknesses and rebound, or are investors in the wireless services provider going to find themselves with no signal soon? Let’s dig a little deeper to find out.

CEO Steve Shindler blames the shutdown of Sprint’s iDEN network, and a slowdown in its subscriber growth and Mexican business for the most recent quarter’s underwhelming revenue growth. Early this year, NII Holdings, Inc. (NASDAQ:NIHD) also planned to raise an additional $400 million via debt offering to compete with Latin American telecom leaders such as America Movil SAB de CV (ADR) (NYSE:AMX) and Telefonica S.A. (ADR) (NYSE:TEF), but the debt raise couldn’t rekindle investors’ faith in the stock.