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Can You Hear Me Now? Iridium Communications (IRDM)

March 10, 2011 | About:
David Chulak

David Chulak

29 followers
Iridium Communications (IRDM) has been around awhile for those that aren't familiar with it and is currently on my watch list. It was a spinoff from Motorola (MSI) in the 90's. It is currently held by George Soros and Whitney Tilson.

Iridium Communications used to be GHL Acquisition and provides mobile voice and data communications via satellite. Its data and voice communications are used by both the U.S. government (State Department, Department of Defense, FEMA and others), along with various foreign governments by Iridium's 60+ satellites. They are expecting a 20% growth in subscribers and have plans to move into China, India and Russia. It also provides communication in areas that do not have cellular service. The outlook for 2011 looks quite positive.

Matt Desch who is Iridium's CEO recently stated:

"Our success in 2010 showed once again that we have a high-growth subscriber base that drives long-term, sustainable revenue and cash flow. With strong contributions from our commercial M2M business, which grew subscribers 60 percent year-over-year, and one of our best years ever in the government sector, we're entering 2011 on a strong competitive footing in each of our vertical markets."

There are several things I really like about this stock. For one, it currently boasts a Piotroski rating of 8. Piotroski, not so unknown anymore, discovered a method that determined how to take companies with low price to book ratios and sort out or filter those companies that had a much higher chance for prospering. A score of 7 or greater typically will indicate a company likely to outperform the market.

One advantage that Iridium holds over its main competitor Inmarsat, which is a British company, is that its low orbit satellites are more easily repaired and/or manipulated over the high flying competitor. Just behind Iridium is Globalstar (GSAT) which currently is not on any gurus list.

Currently trading at $8.40, it has a favorable book value of $9.11 and has a fair value of approximately $11.50 to $14.50. Its P/B ratio is a 0.93 and if you are a fan of the PEG ratio, it currently is 0.27.

Debt/Equity Ratio

0.03


Gross Margin


61.44%


Net Profit Margin


6.52%


Shares Outstanding


70.25 Mil


Market Cap


590.13 Mil


Current ratio

EPS


1.57

0.31



Disclosure: No position

About the author:

David Chulak
David Chulak is a private investor that uses a value approach to investing in the styles of Graham & Dodd and Warren Buffet. Looks for that margin of safety in an effort to preserve capital and attempts to guard against short term market fluctuations by having clear rules laid down in advance for selling an equity. Likes to visit the company's where his investments are in order to understand the business better.

Rating: 3.1/5 (7 votes)

Comments

markdschultz
Markdschultz - 3 years ago


In a couple of years, the Iridium global constellation will need to be replaced. Any investment analysis needs to address that issue first and foremost.
mb212
Mb212 - 3 years ago


Really? You think the satellites can be "repaired"? Is NASA going to send up a shuttle mission? This company has to launch 3 bn into space in the next 5 years. It has less than 200 mm of EBITDA. That sounds like a pretty poor bet to me.

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