Should you purchase? Airtel Africa is dialing the correct numbers

Airtel Africa is a cheap and rapidly expanding mobile phone service provider

Going long on the African mobile phone provider Airtel Africa (LSE: AAF) was one of the page's highly effective tips. By the time I sold it in September 2022, almost a year after I had highlighted it in October 2021, the stock had increased from 98p to 135p, yielding a 1,480 profit. Its performance was mediocre for the next two years, but since November, it has almost doubled. Still, it's worth purchasing.

Airtel Africa specializes in providing phone, internet, and mobile money services to citizens of 14 rapidly developing African nations, including Kenya and Nigeria, which together have a combined population of 662 million. Since these nations lack a banking system, many people rely on mobile-payments services as their only means of sending and receiving money, making the mobile-money component of its offerings especially intriguing. It is estimated that between 65 and 70 percent of adults in these nations do not possess a formal bank account.

Subscriptions to Airtel Africa are skyrocketing.

Whatever metric you choose, Airtel has been doing a fantastic job of growing its clientele. The company's total number of subscribers is growing by less than 10% annually to 166 million when all of its clientsincluding those who only pay for the most basic voice servicesare taken into account. This headline figure, however, understates how much it is growing because the number of people paying for smartphone serviceswhich increases Airtel's revenueis growing at a rate of 20% annually and now makes up about half of all subscribers. Additionally, its money service's subscriber base is expanding by a comparable amount.

Due to this steady growth, Airtel's total revenue has increased by 45% in the last five years and is predicted to continue growing at a rate of 8% to 10% annually. Earnings have been somewhat more erratic, but over the coming years, they should hit all-time highs. An important indicator of profitability, return on capital employed, is about 20%, and operating margins are still high. This has made it possible for it to raise the dividend and use a share-buyback program to give shareholders cash back. The stock has a respectable yield of 2 percent, but it is only trading at 17 points twice 2026 earnings in spite of all these favorable factors.

Additionally, Airtel appears alluring from a technical standpoint. Over the past three, six, and twelve months, the share price has outperformed the overall market and is currently trading above both its 50-day and 200-day moving averages. The Bharti Mittal family, who are rich Indian investors who own a sizable stake in Airtel, have chosen to increase their holding, which is arguably the most encouraging indication that insiders are satisfied with the course of events. At the present share price of 178p at 15 per 1p, I advise going long. Set the stop-loss at 118p, giving you a 900-p total downside.