AT&T shares fell by -1.3% during the day's evening session, and are now trading at a price of $16.41. 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.
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 23.78 and an average price to book (P/B) ratio of 3.46. In contrast, AT&T has a trailing 12 month P/E ratio of -10.9 and a P/B ratio of 1.13.
AT&T's PEG ratio is 13.96, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $170,756 | $181,193 | $143,050 | $134,038 | $120,741 | $121,749 |
| Revenue Growth | n/a | 6.11% | -21.05% | -6.3% | -9.92% | 0.83% |
| Operating Margins | 15% | 15% | 6% | 22% | -3% | -2% |
| Net Margins | 12% | 8% | 1% | 16% | 1% | 1% |
| Net Income (MM) | $19,953 | $14,975 | $1,355 | $21,479 | $1,469 | $1,191 |
| Net Interest Expense (MM) | $8,450 | $8,622 | $7,850 | $9,387 | $6,108 | $6,538 |
| Depreciation & Amort. (MM) | $28,430 | $28,217 | $22,523 | $17,852 | $18,021 | $18,606 |
| Earnings Per Share | $2.85 | $1.89 | -$0.75 | $2.73 | -$1.13 | -$1.4800000000000004 |
| EPS Growth | n/a | -33.68% | -139.68% | 464.0% | -141.39% | -30.97% |
| Diluted Shares (MM) | 6,806 | 7,348 | 7,466 | 7,503 | 7,587 | 6,612 |
| Free Cash Flow (MM) | $22,351 | $29,033 | $28,440 | $26,412 | $16,186 | $19,803 |
| Capital Expenditures (MM) | $21,251 | $19,635 | $14,690 | $15,545 | $19,626 | $17,481 |
| Current Ratio | 0.8 | 0.79 | 0.82 | 1.61 | 0.59 | 0.69 |
| Total Debt (MM) | $176,505 | $163,147 | $170,551 | $175,631 | $150,228 | $144,147 |
| Net Debt / EBITDA | 3.14 | 2.73 | 5.26 | 3.33 | 9.82 | 8.7 |
AT&T suffers from declining revenues and a flat capital expenditure trend, weak operating margins with a negative growth trend, and declining EPS growth. The firm's financial statements also exhibit irregular cash flows and a highly leveraged balance sheet.
