Unveiling T-Mobile US (TMUS) – A Comprehensive Analysis

It's been a great morning session for T-Mobile US investors, who saw their shares rise 1.1% to a price of $198.58 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.

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 20.19 and an average price to book (P/B) ratio of 2.29. In contrast, T-Mobile US has a trailing 12 month P/E ratio of 24.9 and a P/B ratio of 3.7.

When we divideT-Mobile US's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.81, 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.

Strong Revenue Growth but Not Enough Current Assets to Cover Current Liabilities:

2018 2019 2020 2021 2022 2023
Revenue (M) $43,310 $44,998 $68,397 $80,118 $79,571 $78,558
Operating Margins 12% 13% 10% 9% 8% 18%
Net Margins 7% 8% 4% 4% 3% 11%
Net Income (M) $2,888 $3,468 $3,064 $3,024 $2,590 $8,317
Net Interest Expense (M) $835 $727 $2,483 $3,189 -$3,364 -$3,335
Depreciation & Amort. (M) $6,486 $6,616 $14,151 $16,383 $13,651 $12,818
Diluted Shares (M) 856 864 125 1,255 1,255 1,200
Earnings Per Share $3.36 $4.02 $2.65 $2.41 $2.06 $6.93
EPS Growth n/a 19.64% -34.08% -9.06% -14.52% 236.41%
Avg. Price $63.27 $75.39 $103.89 $130.23 $125.25 $198.58
P/E Ratio 18.61 18.57 38.76 53.81 60.51 28.29
Free Cash Flow (M) -$1,642 $433 -$2,394 $1,591 $2,811 $8,758
CAPEX (M) $5,541 $6,391 $11,034 $12,326 $13,970 $9,801
EV / EBITDA 6.87 7.13 7.43 9.95 11.09 11.65
Total Debt (M) $28,198 $25,444 $75,704 $76,438 $71,960 $78,637
Net Debt / EBITDA 2.29 1.94 3.14 3.0 3.34 2.71
Current Ratio 0.81 0.74 1.1 0.89 0.77 0.91

T-Mobile US has rapidly growing revenues and increasing reinvestment in the business and strong operating margins with a positive growth rate. Additionally, the company's financial statements display generally positive cash flows and a strong EPS growth trend. However, the firm has not enough current assets to cover current liabilities because its current ratio is 0.91. Finally, we note that T-Mobile US has significant leverage levels.

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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