Investor sweetheart Telstra Corporation Ltd (ASX: TLS) has been a stellar performer over the last 12 months with shares rising 13%, just below the 14% of the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO).
But Telstra’s earnings growth has been eclipsed by several smaller, nimbler telecommunication companies which are transforming demand for internet connectivity into high margin growth!
There are three companies in particular which could best Telstra for superior growth and investor returns:
1. M2 Group Ltd (ASX: MTU) has been hitting huge growth thanks, in part, to demand for its 4G mobile plans which grew 39% between February and April compared to the prior three months.
It’s growth like that which has seen M2 group boost, earnings before interest, tax, depreciation and amortization (EBITDA) by 38% in the first half of FY14 and earnings per share (eps) by 10%. The result smashes Telstra’s first-half revenue growth of 4.1% and EBITDA growth of 7%.
M2 Group’s full year guidance is for EBITDA growth of up to 48%, which at a price-to-earnings ratio of 20.4 is appealing.
2. Fast growing broadband company TPG Telecom Ltd (ASX: TPM) is also on track to leave Telstra in the dust. First-half 2014 revenue was up 11%, while eps grew 15%.
TPG Telecom has also upgraded full year FY14 guidance from EBITDA of $290-300 million to $340-355 million. But with a dividend yield of less than 2% and a PE of 28, the current share price does not allow much margin for error.
3. With a market cap of $500 million, Amcom Telecommunications Limited (ASX: AMM) is around 1/128th the size of Telstra, but is using that to its advantage, growing EBITDA 16% in the first half of FY14 and eps, before significant items, by 14%.
Amcom operates fibre-optic networks which could see continued strong growth in the coming years with increased reliance on cloud computing and data storage.