–4G LTE: Upcoming network upgrades service providers will have to accommodate for 4G LTE service, which will provide a short-term revenue boost to the company.
–Aggressive International Expansion: The international segment of the company’s business only accounted for 26% of revenue in 2011; however, fast-paced growth derived from Mexico and Brazil is anticipated as those companies deploy 3G networks. In the third quarter of 2012, the company acquired 850 international towers, while only acquiring six communication sites in the US, representing the incredible opportunity presented internationally.
–Fundamental Global Mobile Trend: The total number of mobile devices has grown substantially over the past decades and is widely anticipated to continue to grow into the future, presenting American Tower Corp (NYSE:AMT) the opportunity to capitalize on this fundamental global trend to mobile devices.
–Faltering Consumer Confidence: Weakness in consumer confidence could lead to less mobile devices being purchased, which in turn could threaten the company’s growth.
Major publicly traded competitors of American Tower include Public Storage (NYSE:PSA), Extra Space Storage, Inc. (NYSE:EXR), HCP, Inc. (NYSE:HCP), and Health Care REIT, Inc. (NYSE:HCN) Incorporated. None of these companies competes directly against American Tower, but are all located in the specialty REIT industry.
Public Storage is valued at $26.09 billion, pays out a dividend yielding 2.89%, and carries a price to earnings ratio of 42.69. The company in no apparent way competes with American Tower, however it is an alternative investment in the REIT industry, which will take advantage of many of the same economic trends as American Tower Corp (NYSE:AMT). The company’s business model has proven sustainable and profitable, with the company enjoying a TTM profit margin of 51.08%.
Extra Space Storage is valued at $3.95 billion, pays out a dividend yielding 2.64%, and carries a price to earnings ratio of 39.30. Extra Space competes directly with Public Storage, as they operate in the same industry. Extra Space’s business is also not as fundamentally sound as Public Storage’s, with a TTM profit margin of 29.36%.
HCP is valued at $21.83 billion, pays out a dividend yielding 4.36%, and carries a price to earnings ratio of 25.86. HCP operates in the health care REIT industry, allowing the company to capitalize on the constant demand for health care facilities. HCP possesses a fundamentally sound business with a TTM profit margin of 44.29%.
Health Care REIT is valued at $16.63 billion, pays out a dividend yielding 4.78%, and carries a price to earnings ratio of 126.78. Health Care competes directly with HCP, however it possesses a business that has been decaying over the past years, with its TTM profit margin decaying to the current 15.29% level.
The Foolish Bottom Line
Financially, American Tower is tremendously strong. The company possesses explosive revenue growth, a double digit profit margin, and an incredibly stable and predictable business model. Major weaknesses of the company are its high valuation and minor debt load. Looking forward, the company will derive fast-paced growth from its international segment and more modest growth from the United States. All in all, American Tower Corp (NYSE:AMT) is a screaming buy, is perfectly positioned to capitalize on the monumental mobile trend, and will hand investors returns that trounce the overall market for years to come.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends American Tower and Health Care REIT. The Motley Fool owns shares of American Tower.
The article A Nontraditional REIT Capitalizing on One of the Fastest Growing Industries in the World originally appeared on Fool.com.
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