Cash Machine Trading Cheap – Iridium Communications Stock Set to Run?

We think Iridium Communications (IRDM) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.

What Is Happening With IRDM

IRDM is down 40% so far this year and is now available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to a tightened 2025 service revenue growth outlook and slower IoT/maritime segment expansion. Emerging direct-to-device competition also spurred investor caution.

The stock may not reflect it yet, but here is what’s going well for the company: Iridium secured an $85.8 million five-year U.S. Space Force contract for infrastructure upgrades. Subscribers grew 2% to 2.54 million, led by commercial IoT, supported by a Vodafone partnership. Despite adjusted revenue guidance, strong operational cash flow is expected for 2025. Management targets significant net leverage reduction by decade-end, supported by annual free cash flow exceeding $300 million. Current valuation multiples remain historically low despite these factors.

IRDM Has Strong Fundamentals

• Cash Yield: Iridium Communications offers an impressive cash flow yield of 16.5%.
• Growing: Revenue growth of 7.3% over the last twelve months means that the cash pile is going to grow.
• Valuation Discount: IRDM stock is currently trading at 31% below its 3-month high, 47% below its 1-year high, and 57% below its 2-year high.

Below is a quick comparison of IRDM fundamentals with S&P medians.

*LTM: Last Twelve Months

But What About The Risk Involved?

While IRDM stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. IRDM took some heavy hits in past downturns, dropping 31% in the Global Financial Crisis, nearly 30% in the 2018 correction, and over 43% during the Covid pandemic. The inflation shock hit even harder, with a 47% dive from peak to trough. Even with strong fundamentals, this stock isn’t immune when the market sells off hard. It shows you that risk is real, no matter how good things look on paper. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read IRDM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want to see more details, read Buy or Sell IRDM Stock.

Other Stocks Like IRDM

Not ready to act on IRDM? You could consider these alternatives:

1. DuPont de Nemours (DD)
2. Enphase Energy (ENPH)
3. Remitly Global (RELY)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Positive revenue growth
3. High free cash flow yield
4. Meaningful discount to 3M, 1Y, and 2Y highs

A portfolio that was built starting 12/31/2016 with stocks that fulfil the criteria above would have performed as follows:

• Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
• Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods

Stock Picking Falls Short Against Multi Asset Portfolios

Individual stocks can soar or tank but multi asset exposure steadies the ride. A spread out portfolio captures upside while limiting the damage from any one market.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices