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:
|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|
|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|
|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.