Clearwire Corporation (CLWR): Is This Stock 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 Clearwire Corporation (NASDAQ:CLWR) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

Clearwire Corporation (NASDAQ:CLWR)

What we’re looking for
The graphs you’re about to see tell Clearwire Corporation (NASDAQ:CLWR)’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 take a look at Clearwire Corporation (NASDAQ:CLWR)’s key statistics:

CLWR Total Return Price Chart

Source: CLWR Total Return Price data by YCharts.

Passing Criteria 3-Year* Change Grade
Revenue growth > 30% 418.8% Pass
Improving profit margin 70% Pass
Free cash flow growth > Net income growth 70.4% vs. (123.8%) Pass
Improving EPS 20.1% Pass
Stock growth (+ 15%) < EPS growth (51.8%) vs. 20.1% Pass

Source: YCharts. * Period begins at end of Q4 2009.

CLWR Return on Equity Chart

Source: CLWR Return on Equity data by YCharts.

Passing Criteria 3-Year* Change Grade
Improving return on equity (488.9%) Fail
Declining debt to equity 549.9% Fail

Source: YCharts. * Period begins at end of Q4 2009.

How we got here and where we’re going
Clearwire Corporation (NASDAQ:CLWR) appears to be heading in the right direction, with five out of seven passing grades — but the debt-laden company undermines itself with the sheer rising bulk of its debt relative to everything else. This has been a long-term problem for Clearwire Corporation (NASDAQ:CLWR), and investors haven’t seen much reason to get excited, in spite of movement from unprofitable to slightly less unprofitable. Will Clearwire Corporation (NASDAQ:CLWR) ever reward investors with green ink? Let’s dig a little deeper.

Today’s big news is the proposed merger between DISH Network Corp (NASDAQ:DISH) and Sprint Nextel Corporation (NYSE:S), which has long been Clearwire’s primary lifeline. As recently as last week, we saw some speculation that DISH might back away from the Sprint-Clearwire pairing in its quest for spectrum, only to be surprised this morning by a $25.5 billion merger proposal between the telecom and the TV services provider.

At the moment, Clearwire has a $3.30-per-share offer on the table from DISH Network Corp (NASDAQ:DISH), and let’s face it — Clearwire probably isn’t going to get a better deal than that, given its massive debts and inability to turn a profit. Clearwire’s hand may have been tipped with the DISH-Sprint offer, and we should probably expect a response in the near future.