Crown Castle shares fell by -1.2% during the day's evening session, and are now trading at a price of $107.0. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
Crown Castle's Valuation Is in Line With Its Sector Averages:
Crown Castle owns, operates and leases more than 40,000 cell towers and approximately 85,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. 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, Crown Castle has a trailing 12 month P/E ratio of 27.2 and a P/B ratio of 6.22.
When we divide Crown Castle's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -5.85. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2020-03-10 | 2021-02-22 | 2022-02-22 | 2023-02-24 | |
|---|---|---|---|---|
| Revenue (MM) | $5,763 | $5,840 | $6,340 | $6,986 |
| Operating Margins | 27.6% | 33.3% | 31.9% | 35.2% |
| Net Margins | 14.92% | 18.08% | 20.22% | 23.98% |
| Net Income (MM) | $860 | $1,056 | $1,282 | $1,675 |
| Net Interest Expense (MM) | -$677 | -$687 | -$656 | -$696 |
| Depreciation & Amort. (MM) | -$1,572 | -$1,608 | -$1,644 | -$1,707 |
| Earnings Per Share | $1.79 | $2.62 | $2.95 | $3.93 |
| EPS Growth | n/a | 46.37% | 12.6% | 33.22% |
| Diluted Shares (MM) | 418 | 425 | 434 | 434 |
| Free Cash Flow (MM) | $4,755 | $4,679 | $4,018 | $4,188 |
| Capital Expenditures (MM) | -$2,057 | -$1,624 | -$1,229 | -$1,310 |
| Net Current Assets (MM) | -$26,764 | -$28,203 | -$29,528 | -$30,255 |
| Current Ratio | 0.63 | 0.56 | 0.62 | 0.45 |
| Long Term Debt (MM) | $18,021 | $19,151 | $20,557 | $20,910 |
| Net Debt / EBITDA | 5.8 | 5.72 | 5.71 | 5.31 |
Crown Castle has strong margins with a positive growth rate and exceptional EPS growth. Additionally, the company's financial statements display a steady stream of strong cash flows and growing revenues and decreasing reinvestment in the business. However, the firm has a highly leveraged balance sheet.
