It hasn't been a great morning session for Crown Castle investors, who have watched their shares sink by -1.9% to a price of $106.5. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Crown Castle's P/B and P/E Ratios Are Higher Than Average:
Crown Castle owns, operates and leases more than 40,000 cell towers and approximately 90,000 route miles of fiber supporting small cells and fiber solutions across every major U.S. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 25.55 and an average price to book (P/B) ratio of 2.1. In contrast, Crown Castle has a trailing 12 month P/E ratio of 30.8 and a P/B ratio of 7.24.
When we divide Crown Castle's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -3.49. 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.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $5,370 | $5,763 | $5,840 | $6,340 | $6,986 | $7,071 |
| Operating Margins | 26% | 27% | 32% | 32% | 35% | 34% |
| Net Margins | 12% | 15% | 18% | 18% | 24% | 22% |
| Net Income (M) | $622 | $881 | $1,056 | $1,158 | $1,675 | $1,552 |
| Net Interest Expense (M) | $16 | $21 | $31 | -$17 | $699 | $820 |
| Depreciation & Amort. (M) | $1,527 | $1,572 | $1,608 | $1,644 | $1,707 | $1,745 |
| Diluted Shares (M) | 417 | 418 | 425 | 434 | 434 | 434 |
| Earnings Per Share | $1.23 | $1.79 | $2.35 | $2.53 | $3.86 | $3.58 |
| EPS Growth | n/a | 45.53% | 31.28% | 7.66% | 52.57% | -7.25% |
| Avg. Price | $90.4 | $112.86 | $142.7 | $167.72 | $169.73 | $107.3 |
| P/E Ratio | 73.5 | 62.7 | 60.47 | 66.03 | 43.86 | 29.89 |
| CAPEX (M) | $1,739 | $2,057 | $1,624 | $1,229 | $1,310 | $1,456 |
| EV / EBITDA | 18.28 | 20.7 | 22.62 | 25.43 | 22.98 | 16.7 |
| Total Debt (M) | $16,682 | $18,121 | $19,280 | $20,629 | $21,729 | $22,730 |
| Net Debt / EBITDA | 5.64 | 5.73 | 5.49 | 5.58 | 5.22 | 5.46 |
| Current Ratio | 0.82 | 0.63 | 0.56 | 0.62 | 0.45 | 0.44 |
Crown Castle has strong operating margins with a positive growth rate, rapidly growing revenues and decreasing reinvestment in the business, and a strong EPS growth trend. However, the firm suffers from not enough current assets to cover current liabilities because its current ratio is 0.44 and a highly leveraged balance sheet.
