Wednesday, July 8, 2009

Windstream started at Buy at Soleil (WIN)

AlphaNinja - Soleil initiated coverage of Windtream (WIN) with a buy rating, and sees about 30%% upside to its $10.50 target price. I bring it up because they highlight an metric that is a favorite of AlphaNinja -->> Free Cash Flow Yield (FCFY).

Windstream and its subsidiaries provide various telecom services to rural US communities. Soleil likes the company's 12% dividend yield, and cites a 19% FCFY. I'm closer to a 16% FCFY with my estimates, but either offer a great yield.

The only trouble (and it's not minor) is the burdensome debt load the company carries:

The bulk of the debt is not duAdd Imagee anytime soon. Windstream appears to be well above its debt covenant ratios (lender requirements - basically the amount over and above quarterly interest payments they demand that you earn). Though heavily indebted, Windstream's earnings look stable, and the dividend yield and FCFY are huge, so I'd agree with Soleil that there's some good upside here.

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