NII Holdings Inc (NASDAQ:NIHD), a US$53.26M small-cap, operates in the telecommunications market which continues its transformation into the industry that is underpinning the digital and interconnected economy. Telco analysts are forecasting for the entire industry, a somewhat weaker growth of 6.19% in the upcoming year , and a single-digit 5.96% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Today, I’ll take you through the energy sector growth expectations, as well as evaluate whether NII Holdings is lagging or leading in the industry. Check out our latest analysis for NII Holdings
What’s the catalyst for NII Holdings’s sector growth?
The convergence that has been talked about is now happening, but driven by disruption rather than well-considered strategies and marketing campaigns. Overall the growth in this segment of the telco industry is stagnating, and often the only way to maintain profitability is through cost-cutting. On the positive side, innovations and technological developments allow these companies to be more cost-competitive. In the past year, the industry delivered growth in the teens, beating the US market growth of 9.87%. NII Holdings lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means NII Holdings may be trading cheaper than its peers.
Is NII Holdings and the sector relatively cheap?
The telco sector’s PE is currently hovering around 17.04x, relatively similar to the rest of the US stock market PE of 18.85x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 15.94% compared to the market’s 10.49%, potentially illustrative of a turnaround. Since NII Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge NII Holdings’s value is to assume the stock should be relatively in-line with its industry.
NII Holdings has been an telco industry laggard in the past year. If NII Holdings has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its telco peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at NII Holdings’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has NIHD’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of NII Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.