Through The Fly's Eyes: NeuStar
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
Managing the Numbers Game
Ever wonder whether there is a central authority managing all the telephone numbers, enabling the dynamic routing of calls among thousands of competing communications service providers? There is, you know, and it's headquartered in Sterling, Virginia.
NeuStar Inc (NSR) provides services to the North American communications industry and to Internet service providers around the world. In North America, the firm manages the database of area codes and phone numbers used by carriers to route calls. On the Web, it operates a registry of domain addresses. The company is a leading provider of clearinghouse services for such telecom carrier functions as ordering, service provisioning, billing and customer service. Clients include Verizon Communications (VZ), Sprint Nextel Corp. (S) and AT&T, Inc. (T).
NeuStar pleased the Street last week, when it announced preliminary Q1 EPS of 21-22 cents and revenues of $96.5-$97.5 million. Analysts had been looking for 22 cents and $97.0 million. Management also affirmed FY07 EPS of $1.04-1.09 ($1.07 consensus) and revenues of $428-$438 million ($433.9M consensus).
NSR shares popped on the news and have since been defining a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with six "strong buys," seven "buys" and three "holds." Analysts see a 29% growth rate, through the next year. The NSR Price to Free Cash Flow ratio (20.98), Sales Growth rate (45.11%), Operating Margin (36.83%), Net Profit Margin (22.20%), Return on Assets (20.21%), Return on Investment (25.49%) and Return on Equity (28.03%) compare favorably with industry, sector and S&P 500 averages.
Institutions hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $25.01 and $37.73. A stop-loss of $25.50 looks good here. Note that the firm is expected to announce first quarter results during the first week of May.