Good call: telecommunications growth gives this stock towering potential - Specialty Teleconstructors Inc

Each month in this column, expert brokers will highlight stocks of interest to entrepreneurial investors.

The Company: Specialty Teleconstructors Inc., Cedar Crest, New Mexico. Founded in 1981, Specialty Teleconstructors builds and services towers for wireless telecommunications companies.

The Markets: Specialty Teleconstructors serves the ESMR (enhanced specialized mobile radio) and PCS (personal communications services) wireless industries. Clients include Bell Atlantic, Cellular One, Sprint Cellular, Nextell, AT&T, PCS PrimeCo and Motorola. The market for telecommunications infrastructure is estimated to be $20 billion to $40 billion, and 20 percent to 30 percent of this market falls into the category of service that Specialty Teleconstructors provides.

The Sizzle: The market for construction of telecommunications infrastructure is expected to boom in the coming years. The Federal Communications Commission (FCC) has sold more than $18 billion worth of licenses to PCS carriers in the recent past. Industry insiders estimate that at least 100,000 PCS base stations and 15,000 cellular base stations must be built to meet the needs of the PCS industry.

FCC chairman Reed Hunt says, "The investment in the infrastructure for wireless communications over the next several years will be the single largest peacetime investment in this country's history."

The Risks: There is speculation that satellite transmission, rather than tower-based transmission, will be the wave of the future for wireless communications. In addition, the company faces competition from other larger firms entering the market and from the difficulty in fulfilling its need for highly skilled workers.

Historical Financial Performance: For fiscal year 1996, which ended in June, the company had revenues of $16.8 million, net income of $804,000 and earnings per share of 20 cents, an increase of 122 percent over fiscal 1995. The company has total assets of $12.8 million and recently acquired a firm in Gilbert, Arizona, which will increase total assets.

Since its initial public offering in 1993, Specialty Teleconstructors has posted record revenues for each consecutive quarter. For the first quarter of fiscal 1997 (ended September 30, 1996), it had $5.5 million in revenues, $285,000 in net income and earnings per share of $0.07, an increase of 600 percent in earnings per share over the first quarter of 1996.

Projected Financial Performance: Since Specialty Tele-constructors is in a high-growth industry and is undertaking an aggressive acquisition strategy, it's difficult to accurately predict the growth the company will experience. Accordingly, the estimates in the chart above are conservative.

At A Glance

Name: Specialty Teleconstructors Inc. Sales $16.8 million (fiscal year ending 6/30/96) Earnings: $804,000 Earnings per share: $0.20 Shares outstanding: 4.09 million Recent price: $8.12 Total assets: $12.8 million Stock market: Nasdaq National Market Symbol: SCTR

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Paul Jackson is a financial consultant with McFarland, Grossman & Co. Inc. in Houston. The above opinions are those of the author and not of Entrepreneur. These investment vehicles may not be right for you. Carefully investigate before investing.

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