Your Briefing on T-Mobile US Stock

We've been asking ourselves recently if the market has placed a fair valuation on T-Mobile US. Let's dive into some of the fundamental values of this large-cap Telecommunications company to determine if there might be an opportunity here for value-minded investors.

T-Mobile US's Valuation Is in Line With Its Sector Averages:

T-Mobile US, Inc., together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. 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, T-Mobile US has a trailing 12 month P/E ratio of 27.9 and a P/B ratio of 2.52.

When we divideT-Mobile US's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.29, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.

The Company Has a Highly Leveraged Balance Sheet:

2018-02-08 2019-02-07 2020-02-06 2021-02-23 2022-02-11 2023-02-14
Revenue (MM) $40,604 $43,310 $44,998 $68,397 $80,118 $79,571
Gross Margins 56.0% 57.0% 59.0% 59.0% 54.0% 54.0%
Operating Margins 11% 12% 13% 10% 9% 10%
Net Margins 11.0% 7.0% 8.0% 4.0% 4.0% 3.0%
Net Income (MM) $4,536 $2,888 $3,468 $3,064 $3,024 $2,590
Net Interest Expense (MM) -$1,654 -$1,338 -$1,111 -$2,701 -$3,342 -$3,364
Depreciation & Amort. (MM) -$5,984 -$6,486 -$6,616 -$14,151 -$16,383 -$13,651
Earnings Per Share $5.14 $3.36 $4.02 $2.65 $2.41 $2.06
EPS Growth n/a -34.63% 19.64% -34.08% -9.06% -14.52%
Diluted Shares (MM) 872 858 863 1,155 1,254 1,255
Free Cash Flow (MM) $14,896 $9,567 $14,182 $21,007 $35,609 $34,082
Capital Expenditures (MM) -$11,065 -$5,668 -$7,358 -$12,367 -$21,692 -$17,301
Net Current Assets (MM) -$39,089 -$39,469 -$48,827 -$110,933 -$116,570 -$122,615
Long Term Debt (MM) $26,707 $26,706 $24,944 $66,546 $68,570 $66,796
Net Debt / EBITDA 2.55 2.23 1.98 3.1 3.1 3.31

T-Mobile US has weak revenue growth and a flat capital expenditure trend, weak operating margings with a stable trend, and flat EPS growth. In addition, we note irregular cash flows. Furthermore, the firm suffers from slimmer gross margins than its peers and a highly leveraged balance sheet.

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.

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