Could Cash Machine SBA Communications Stock Be Your Next Buy?
SBA Communications (SBAC) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. 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
SBAC Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 6.0%, but SBA Communications stock does
- Strong Margin: Last 12 month operating margin of 55.2%
- Growth: Last 12 months’ revenue growth of 5.1% – low growth, but this selection is all about high yield and margin
- Valuation: SBAC stock is currently trading at 31% below its 2Y high, 17% below its 1M high, and at a PS lower than its 3Y average.
Below is a quick comparison of SBAC fundamentals with S&P medians.
| SBAC | S&P Median | |
|---|---|---|
| Sector | Real Estate | – |
| Industry | Telecom Tower REITs | – |
| Free Cash Flow Yield | 6.0% | 4.4% |
| Revenue Growth LTM | 5.1% | 6.6% |
| Revenue Growth 3YAVG | 2.3% | 5.5% |
| Operating Margin LTM | 55.2% | 18.7% |
| Operating Margin 3YAVG | 51.6% | 18.2% |
| PE Ratio | 16.8 | 23.6 |
*LTM: Last Twelve Months
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But What Is The Risk Involved?
While SBAC stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. SBAC took a hit of nearly 89% in the Dot-Com crash and dropped over 72% during the Global Financial Crisis. The inflation shock wasn’t kind either, with a 50% decline. Even less severe events like the Covid sell-off and the 2018 correction pushed it down by around 29% and 16%, respectively. Solid fundamentals don’t erase the risk—when markets turn, even strong stocks can face steep declines.
For more details and our view, see Buy or Sell SBAC Stock.
Stocks Like SBAC
Not ready to act on SBAC? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few years average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed as follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
The Right Way To Invest Is Through Portfolios
Individual stocks can soar or tank, but one thing matters: staying invested. The right portfolio can help you stay invested, capture upside, and mitigate the downside associated with any individual stock.
Why settle for average market returns? The Trefis High Quality (HQ) Portfolio invests in a diverse group of 30 stocks that have collectively delivered stronger upside with reduced volatility compared to the broader indices. Discover the methodology behind these smoother, higher returns by checking the HQ Portfolio performance data.