What You May Have Missed About AT&T (T)

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.

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.