Published: January 8, 2007

Latin America has been one of the best places to stash your money lately. In fact, the S&P Latin 40 Index has delivered robust annualized gains of +43% over the past four years. And even by those lofty standards, America Movil (NYSE: AMX, $58.61) has been a true standout -- posting a sizzling cumulative gain of +575% over the same time frame.

After such a powerful rally, you might assume that the stock is exorbitantly priced and well out of reach. But that just isn't the case. In fact, the shares are trading at just 15 times next year's earnings. That multiple is highly compelling against America Movil's lofty 5-year projected earnings growth of +32%.

So on a price-to-earnings-to-growth (PEG) basis, AMX is a veritable steal compared to slower-moving U.S. telecoms like Sprint Nextel (NYSE: S) or Verizon Wireless (NYSE: VZ).

Clearly, given the tremendous run-up in the stock, America Movil isn't undervalued because it has run into problems, but because the firm's core business is growing by leaps and bounds.

Spun off from Mexican long distance carrier Telmex seven years ago, America Movil has grown to become Latin America's leading telecommunications firm. Today, the company controls a dominant 70% share of the Mexican cellular phone market and has built a base of 140 million wireless customers in Brazil, Argentina and more than a dozen other countries -- including portions of the Caribbean and the United States.

Wireless penetration rates have soared in recent years. For example, nearly 90% of Venezuela's 27 million residents now have cell phones. As those rates inch ever higher, the days of heady subscriber growth may be ending in some markets. However, there is still considerable untapped opportunity in many regions, such as India -- where penetration currently stands at just 18%.

And it seems likely that America Movil is on the hunt for expansion opportunities. The firm made a play for Telecom Italia earlier this year, and while the bid came up short, the takeover attempt does suggest that management is looking to branch out beyond its core Latin American turf.

None of this is to say that the firm's growth is about to hit a wall -- analysts are forecasting earnings to jump to $2.91 per share this year and then $4.02 per share in 2008. However, even with flat growth, America Movil would still be attractive.

The firm's 140 million customers generate revenues in excess of $20 billion per year, and with one of the strongest operating margins (28%) in the industry, those sales produce more than $6 billion in annual operating cash flows. As expansion needs wind down, more and more of that cash flow will be funneled into dividends and share repurchases.

With a hefty Price Appreciation Potential (PAP) of +30%, AMX offers an attractive risk/reward profile for anyone looking to boost their exposure to the booming Latin American markets.

Nathan Slaughter
Editor
Half-Priced Stocks

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About Nathan Slaughter

Nathan Slaughter has developed a long and successful track record over the years by investing primarily in deeply discounted securities. He uses advanced discounted cash flow techniques, along with a host of fundamental research, to uncover quality stocks that are trading well below their actual intrinsic value.

Nathan's previous experience includes a long tenure at AXA/Equitable Advisors, where he provided comprehensive investment advisory services to small businesses and high net-worth clients. He also honed his research skills at Morgan Keegan, where he performed asset allocation, retirement planning, and consultative portfolio management services.

Several years ago Nathan switched gears and decided to devote his time exclusively to financial analysis and writing. He has since published hundreds of articles for a variety of prominent online and print publications, and he now writes exclusively for StreetAuthority.com.

Nathan's educational background includes NASD series 6, 7, 63, & 65 certifications, as well as a degree in Finance/Investment Management. He currently resides in Shreveport, LA with wife Julie and sons Aidan and Riley. 

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