It's been a great afternoon session for AT&T investors, who saw their shares rise 1.4% to a price of $14.38 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
AT&T Has an Attractive P/B Ratio but a Worrisome P/E Ratio:
AT&T Inc. provides telecommunications and technology services worldwide. The company belongs to the Telecommunications sector, which has an average price to earnings (P/E) ratio of 18.85 and an average price to book (P/B) ratio of 3.12. In contrast, AT&T has a trailing 12 month P/E ratio of -12.3 and a P/B ratio of 1.01.
When we divide AT&T's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -11.49. 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.
The Company's Revenues Are Declining:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $181,193 | $171,760 | $168,864 | $120,741 |
| Gross Margins | 53.6% | 53.5% | 52.7% | 57.9% |
| Operating Margins | 16.2% | 14.7% | 16.7% | 19.0% |
| Net Margins | 7.67% | -3.01% | 11.89% | -7.06% |
| Net Income (MM) | $13,903 | -$5,176 | $20,081 | -$8,524 |
| Net Interest Expense (MM) | -$8,422 | -$7,925 | -$6,884 | -$6,108 |
| Depreciation & Amort. (MM) | -$28,217 | -$28,516 | -$22,862 | -$18,021 |
| Earnings Per Share | $1.89 | -$0.75 | $2.76 | -$1.17 |
| EPS Growth | n/a | -139.68% | 468.0% | -142.39% |
| Diluted Shares (MM) | 7,348 | 7,183 | 7,199 | 7,149 |
| Free Cash Flow (MM) | $29,233 | $27,455 | $25,430 | $12,397 |
| Capital Expenditures (MM) | -$19,435 | -$15,675 | -$16,527 | -$19,626 |
| Net Current Assets (MM) | -$295,189 | -$294,513 | -$307,770 | -$263,288 |
| Current Ratio | 0.8 | 0.82 | 0.7 | 0.59 |
| Long Term Debt (MM) | $151,709 | $153,775 | $152,820 | $128,423 |
| Net Debt / EBITDA | 2.79 | 4.58 | 2.85 | 6.83 |
AT&T suffers from declining revenues and a flat capital expenditure trend, slimmer gross margins than its peers, and declining EPS growth. The firm's financial statements also exhibit a deteriorating pattern of cash flows and a highly leveraged balance sheet. On the other hand, the company has average operating margins with a stable trend working in its favor.
