We've been asking ourselves recently if the market has placed a fair valuation on American Tower. Let's dive into some of the fundamental values of this large-cap Real Estate company to determine if there might be an opportunity here for value-minded investors.
The Market May Be Overvaluing American Tower's Earnings and Assets:
American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of nearly 226,000 communications sites and a highly interconnected footprint of U. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 24.81 and an average price to book (P/B) ratio of 2.24. In contrast, American Tower has a trailing 12 month P/E ratio of 66.6 and a P/B ratio of 16.81.
American Tower's PEG ratio is 4.65, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Exceptional Profitability Overshadowed by Excessive Leverage:
|Net Income (MM)||$1,888||$1,691||$2,568||$1,766|
|Net Interest Expense (MM)||-767||-754||-830||-1,065|
|Net Interest Expense (MM)||-$767||-$754||-$830||-$1,065|
|Depreciation & Amort. (MM)||-$1,796||-$1,871||-$2,333||-$3,355|
|Earnings Per Share||$4.24||$3.79||$5.66||$2.93|
|Diluted Shares (MM)||446||446||453||466|
|Free Cash Flow (MM)||$2,761||$2,850||$3,443||$1,823|
|Capital Expenditures (MM)||-$991||-$1,032||-$1,377||-$1,874|
|Net Current Assets (MM)||-$33,661||-$39,547||-$57,089||-$51,164|
|Long Term Debt (MM)||$21,127||$28,498||$38,686||$34,156|
|Net Debt / EBITDA||5.18||6.32||7.01||6.03|
American Tower has growing revenues and increasing reinvestment in the business, strong margins with a negative growth trend, and consistent free cash flow. However, the firm suffers from declining EPS growth and a highly leveraged balance sheet.