Cincinnati Bell, Inc. (CBB 19)
From Weiss Stock Ratings Heat Maps
The Best Hot-Sector Leaders screen contains the highest Buy-rated stocks in the market’s hottest sectors relative to the S&P 500.
Mechanics behind the Heat Map
This Heat Map uses a three-step screening process to sift through more than 13,000 stocks and identify top-performing sectors. Here is the step-by-step selection process:
• Identify top-performing sectors relative to the S&P 500 Index.
• Sort the sector performance from the high to low.
• Use a proprietary numerical score to identify the strongest Buy-rated companies in the top performing sectors.
One of the best-performing sectors this year is Telecom services. Top on the list in that sector is Cincinnati Bell, Inc. (CBB).
Cincinnati Bell provides integrated communications solutions—including local and long-distance voice, data, high-speed internet and video. The company operates through two separate units: Entertainment and Communications and IT Services and Hardware.
The company reports third-quarter earnings after the close on November 2. Forecasts are for earnings-per-share (EPS) of $0.05 on revenues of $300 million (WSBDS Editor’s Note: The company beat estimates, earning $0.07 per share on revenues of $312.4 million).
These forecasts are in line with a Gabelli & Co. release earlier in the month that upgraded the stock from a “Hold” to a “Buy”.
Measuring Value—Enterprise Value/Revenue
Cincinnati Bell has an Enterprise Value of $2.11 billion and 12-month trailing revenues of $1.177 billion, which equates to a ratio of 1.79. This is considerably below its industry peers of 4.90 and suggests the company is undervalued.
Another valuation metric commonly used is the price-to-sales ratio (P/S). CBB has a P/S ratio of 0.72 on a 12-month trailing basis, which is significantly below its industry peer average of 5.07. This ratio measures value placed on each dollar of CBB’s sales, and it too is considered undervalued.
What do the charts say?
Shares of Cincinnati Bell pulled back 25.7% from their August 2016 high of $25.65 into the October low of $19.06. The stock has since established a value zone around the $20.00 area. This coincides with a 50% retracement level of the explosive 2016 rally, as well as the October 2015 and April 2016 peaks.
The above chart of Cincinnati Bell’s share price is stabilizing a two-month downdraft in the $20.00 area. A supportive third-quarter earnings report could be the catalyst to engineer an advance back to the August high.
We used the Best Hot-Sector Leaders Heat Map to find the highest-rated stocks in sectors outperforming the S&P 500. Cincinnati Bell fit that bill. Further research showed CBB relatively undervalued against its industry peers. After a two-month pullback, the stock bounced up off a key support level and is ripe for more upside. The upcoming earnings report could be that catalyst.
Mike Burnick, Weiss Stock Ratings Heat Maps, published by Money and Markets, a Division of Weiss Research, Inc.,
www.weissresearchissues.com/weiss-stock-ratings-heat-maps, 1-800- 291-8545, October 28, 2016