Our #1 Under-the-Radar Stock Under $20

Telecom isn’t a sector you’d usually go to find monster rallies — but that’s exactly what some of the most fundamentally sound companies in that space have been providing as of late. The issue here is that the sector is capital-intensive, even defensive — and when tickers do see a sudden shift in sentiment, prices move quickly. More often than not, these shifts are hard to predict.

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Take Millicom (NASDAQ: TIGO) for instance. It’s no small-fry — right now, the market cap is sitting at $13.9 billion after a whopping 141% surge in the past 365 days. That rally didn’t come out of nowhere — sure, there were hints that operating leverage was kicking in and that profitability was improving, but the extent of the surge was definitely a surprise.

So, is TIGO still a good opportunity? Yeah — our in-house quant rating system, which looks at stocks through a lens of 115 different factors, put the stock in the top 10% for overall fundamentals. That gives it a Zen Rating of B — which has historically corresponded to an average annual return of 19.88%.

Here’s the thing, though — the stocks that have a Zen Rating of A (top 5% overall) have provided an average annual return of 32.52%. The difference is significant. And there is a stock that currently fits the bill — one which I think presents a better opportunity than Millicom right now.

Now, let’s talk about that stock that we think represents a FAR stronger opportunity.

That stock is…

Ooma (NYSE: OOMA).

Not familiar? I’m not surprised. This is an under-the radar company for sure. It’s an enterprise-grade cloud communications company. Its platform helps small and mid-sized businesses run their communications stack without the cost or complexity of legacy systems. Right now, OOMA shares have a Zen Rating of A, and rank in the top 2% of the equities we track.

Each Zen Rating consists of 7 Component Grade ratings, and these can clue us in on the specific strengths of each ticker. So let’s just pull up the grades for both — TIGO on the left, OOMA on the right.

Both tickers have 5 C grades - these are areas where they rank in the middle of the pack. Average — not too shabby, but not impressive either. The difference is where (and how much) they shine. While TIGO enjoys above-average B grades for Growth and Momentum, OOMA gets an A on Growth and Sentiment. We’ll get to those big differences in a minute — first, let’s see what’s hiding under those C grades.

When it comes to a couple of these ratings, the stocks are so closely matched that there’s no clear winner. To be specific, I’m talking about Financials and Safety here. With regard to our Artificial Intelligence rating, which uses a neural network trained on more than two decades of market data to spot likely outperformers, Millicom ranks in the 49th percentile (equivalent to or better than 49% of stocks), while OOMA ranks in the 71st percentile.

Value is an interesting case. Both stocks get a C, but I’d give the edge to Ooma for a very simple reason. Right now, it’s trading at roughly 12 and a half times forward earnings, compared to TIGO’s 22.47x.

That leaves us with the areas where the difference is most pronounced — Growth, Sentiment, and Momentum. We’ll go in reverse order. Millicom is in the top 11% for Momentum — OOMA is in the top 38%. The reason behind this is simple — TIGO has simply been on a much longer streak, although I do want to turn your attention to the 1-month and 3-month results on the charts below.

We’re left with two ratings to compare — Sentiment and Growth. We’re going to look at Sentiment first. Top 5% for OOMA, top 44% for TIGO. The gap is significant, and it’s easy to see why when we compare the analyst picture. The average price target for Millicom implies a downside of almost 17%, whereas with Ooma, the average price forecast implies an almost 13% upside. Wall Street is firmly bearish on TIGO, and firmly bullish on OOMA.

Finally, we come to Growth — and this is the biggest difference-maker. Ooma ranks in the top 1% here — and TIGO scores decently, but still only in the top 17%. Analysts are actually expecting negative earnings growth for Millicom, to the tune of -6.24% — compared to an expected growth rate of 84.32% for Ooma.

Lastly, I want to turn your attention to how the two stack up in terms of execution. TIGO has beaten EPS estimates for the past 4 quarters, while OOMA has done so for 10 consecutive quarters.

Once all is said and done, while both stocks rank highly, it’s clear that one has a clear edge. To Millicom’s credit, maintaining a B rating after a 140% surge is very impressive — and if it dips, I’d strongly consider opening a small position. But right now, at these prices — OOMA is the clear winner.

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