With shares of Windstream Corporation (NASDAQ:WIN) trading at around $8.73, is Windstream an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
When you see a large short position such as 11.30 percent for Windstream, you have to ask yourself what those shorts are seeing. Sometimes it’s difficult to figure out. In the case of Windstream, it’s simple. Windstream doesn’t have enough cash flow to continue paying its hefty dividend. When you combine this situation with an unhealthy balance sheet, there could be trouble on the horizon.
On the other hand, there has been very consistent insider buying over the past year. The next step is to figure out why insiders are buying. This is often difficult, as is the case here. Looking at it as an outsider, insiders look like chumps. Then again, in more cases than not, those insiders end up looking like geniuses. We know that Windstream wants to increase its business customers, and that it wants to plan for cloud computing services in that arena. It’s possible that Windstream has a well-devised and unrevealed game plan for these services. We also know that cash flow is good (for now,) that annual revenue growth is above average, and that at least for now, there is indeed a nice dividend.
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Windstream will of course stick with its landline services to rural customers, but they want to add high-end services. It’s difficult to imagine how Windstream would pull this off in the current economic environment, but once again, it’s possible that they know something we don’t know.
Instead of all this guesswork, let’s take a look at some numbers. They often tell the story on their own.