American Tower Corp. (NYSE: AMT) is an independent owner and operator of wireless broadcast and communications real estate, and its asset portfolio includes over 65,000 towers worldwide. American Tower has a solid track record of growth and profitability based on its high-quality assets and attractive operating model. Although the stock has risen handily over the years, shares still remain attractive by historical standards based on forward price/earnings and price to funds from operations (FFO) ratios.

According to the analyst firm, Argus, American Tower stands apart from its competitors due to its size, superior margins, and growth in both earnings per share (EPS) and FFO.

Shares are up 25.8% year to date compared to a 23.8% gain for the FTSE NAREIT All Equity REIT index and 10.6% capital appreciation for the S&P 500.

At the end of 2013 the company’s communications real estate portfolio contained 67,418 sites, including wireless and broadcast communications towers. This portfolio also includes non-owned sites that are managed under long-term arrangements and 349 distributed antenna systems networks, which provide seamless coverage within buildings and in outdoor settings like stadiums.

The portfolio includes 27,379 towers in the U.S.,or 41%, and 39,330 towers, or 59%, in international locations. Despite there being more towers overseas, the U.S. towers tend to generate a higher revenue.

As a result of American Tower’s expansive portfolio and competitive advantage, Argus initiated coverage of it with both a near-term and long-term Buy rating and a price target of $115.

In Argus’s view:

American Tower stands out among publicly traded tower companies, a small list that includes Crown Castle International (CCI) and SBA Communications Corp. (SBAC). American Tower, with a $39.9 billion market cap, is larger than CCI ($26.8 billion) and SPAC ($14.7 billion). It also expects above-peer-average growth in both revenue (22%) and EPS (55%) this year. In addition, its operating margin of 37.7% is well above the peer average of 19.5%.

A key competitive advantage that American tower has over its competitors is its global exposure to fast-growing mobile telephony markets. Argus would mention in its report that nearly 60% of its towers are outside of the U.S., Crown Castle’s global exposure is mainly limited to Australia and SBA Communications operates exclusively in the Americas.

A key risk for American tower is potential technological disruption. A large potential threat from industry watchers is the development of small-cell alternative technology which could make cell towers obsolete. Despite this threat the explosion in global data traffic is expected to far outpace any small-cell technology and infrastructure.

An excerpt from Argus’ report:

Since 2012, American Tower has operated as a real estate investment trust (REIT). It has also developed a capital allocation strategy with the goal of increasing adjusted funds from operations (FFO) and return on invested capital. To maintain its REIT status, the company is required to distribute at least 90% of REIT taxable income to stockholders annually. After meeting this requirement, AMT will continue to allocate capital to meet ROI criteria, including the acquisition of new tower assets.

For the quarter ended in October, American Tower reported $1.04 billion in revenue, an increase of 29% year over year. Domestic Rental and Management increased 25.2% to $664 and international Rental and Management increased 30.3% to $348 million.

As an acquisitive company with low cash flow volatility, American Tower operates with significant debt and relatively low cash & equivalents, it was $460 million at the end of the third quarter. Total debt was $13.93 million at the end of the third quarter.

Moody’s gave a long-term rating of Baa3 and Standard & Poor gave the company a long-term foreign issuer and long-term local issuer credit BBB-. Moody’s outlook is negative while the S&P outlook is stable.

Shares of American Tower were barely up less than 1% at $102.47 at the opening bell. The stock has a consensus analyst price target of $109.44 and a 52-week trading range of $75.65 to $102.76.

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