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Should you buy Vocus Communications Limited at today’s share price?

Credit: highways england

The share price of Vocus Communications Limited (ASX: VOC) soared to a record high of $7.15 at lunchtime today as investors warm to its prospects of becoming a major force in the Australia and New Zealand internet and telecommunications sector.

Vocus recently announced a proposed merger with M2 Group Ltd (ASX: MTU) that would bring together the internet infrastructure of Vocus with the retail customer base and sales strength of M2 Group.

The proposed new chief executive of this group would be telco-whiz and founder of Vocus, James Spenceley, while all of the entrepreneurial and growth-hungry management team at M2 Group would presumably stay on board.

Combined the two groups could look to rival TPG Telecom Ltd (ASX: TPM), which is a larger operator in the telco sector that unsuccessfully attempted to block a merger between Vocus and another internet services provider named Amcom earlier in 2015.

TPG’s competitive position would be threatened by the Vocus and M2 Group marriage, although it still has far greater scale and the fire-power to defend its market share.

TPG shares are up around 650% over just the past four years as the company mopped up market share as a low-cost internet provider with its own infrastructure that supported bulging profit margins and torrid growth.

All of these businesses operate in the growth sectors of internet and cloud services that enjoy considerable tailwinds thanks to mobile and general growth in the demand for data and internet connectivity among many other things.

Unsurprisingly, the market is placing a high value on all their shares, including Vocus at $7.15, although I personally still like the look of it as one of the best growth stocks available on the ASX.

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Motley Fool contributor Tom Richardson owns shares of M2 Group Ltd and Vocus Communications Limited. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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