Comparing the Profit Margins and Cash Flows of T-Mobile US (TMUS)

By Tamara Parker • Wednesday, December 21 12:01 • Permanent Link

T-Mobile US, a large-cap Telecom Services company, moved 0.1 during today's afternoon session. The company's business may appear to be profitable at first glance, since its most recent operating margins stand at 8.6%. But there is more to the story.

Investors should review the company's profitability over several years, and also its ability to convert these profits into hard cash. Some profitable companies struggle in this respect. For example, an unexpected increase in capital expenditures, or an inability to collect payments from customers can quickly empty a company's coffers despite healthy profits on paper. Let's compare T-Mobile US's operating profits and cash flows side-by-side to see this process firsthand.

Date Reported	Total Revenue ($ MM)	Operating Expenses ($ MM)	Operating Margins (%)	YoY Growth (%)
2021-12-31	80,118	36,621	8.6	-16.59
2020-12-31	68,397	33,077	10.31	-18.95
2019-12-31	44,998	20,755	12.72	3.75
2018-12-31	43,310	19,647	12.26	n/a

Date Reported	Cash Flow from Operations ($ MM)	Capital expenditures ($ MM)	Free Cash Flow ($ MM)	YoY Growth (%)
2021-12-31	13,917	-21,692	-7,775	-108.61
2020-12-31	8,640	-12,367	-3,727	-597.94
2019-12-31	6,824	-7,358	-534	69.81
2018-12-31	3,899	-5,668	-1,769	n/a

T-Mobile US's free cash flows are growing at a slower pace than operating margins. Free cash flows are calculated on the basis of operating cash flows (the money coming in from the business) minus capital expenditures (long term investments in the business). Capital expenditures are accounted for on the income statement in the form of depreciation expenses, so they eventually will have an affect on operating margins.

In the case of T-Mobile US, revenues and operating expenses exhibit growth rates of 24.3% and 25.2% respectively. Looking to the cash flow statement, we see that capital expenditures are growing at a 57.8% rate and cash flow from operations are growing at 54.2%.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.