...and Wireless ChangeWaves

12/05/2003 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

Like VoIP, wireless-number portability and telecom bundling are other technologies that are impacting the telecom world. Tobin Smith considers these trends as "Change Waves," which like tidal waves, are unalterable. Here is his top pick to play these unfolding trends.

"Evolving Systems (EVOL NASDAQ), my top portability pick, has already rocketed 116% since I first recommended the stock just three months ago.  And the profit train isn't stopping yet. I just re-recommended the stock at current prices, and we're looking to double our money again in the next six-12 months. The federal government has mandated that cellular service providers must allow customers to take their cell-phone number with them when they change carriers.  And the mandate has just kicked in. This is a major shift in the cellular marketplace. Evolving Systems is the little-known intellectual property owner that I want you to buy.

"But it's not the end of the story. Telecom bundling is the next big growth wave, and it's developing now. Evolving Systems is the only player that's positioned to ride this massive telecom trend to its fullest profit potential.  EVOL sells one of the best applications for Presence and Availability Management- a fancy phrase for the value-added, bundled services (like SMS messaging and Nextel's nationwide walkie-talkie service) that cellular carriers are racing to offer customers. I do not make this stuff up.  This company is a virtual lock for out-of-the-ballpark profits as this monster telecom wave builds momentum and hits its stride. 

"The stock has a trailing P/E ratio of 16 times, and it sells for eight times cash flow. It also gets a whopping 90% return on equity.  What's more, according to my analysis, it is a 30%-40% earnings grower over the next 18-24 months- if it doesn't get bought out at a substantial premium to today's price first. All my calculations show that today's valuation is still absurdly low, even after the stock's recent jump. This stock should double in the next six-12 months. Buy it today below $15 and enjoy the ride."

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