A strong performer from today's afternoon trading session is AT&T, whose shares rose 1.5% to $20.97 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
AT&T's Earnings and Assets May Be Undervalued:
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 20.19 and an average price to book (P/B) ratio of 2.29. In contrast, AT&T has a trailing 12 month P/E ratio of 12.1 and a P/B ratio of 1.43.
AT&T's PEG ratio is 8.84, 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 (M) | $170,756 | $181,193 | $143,050 | $134,038 | $120,741 | $122,428 |
| Operating Margins | 15% | 15% | 6% | 19% | -4% | 19% |
| Net Margins | 11% | 8% | -4% | 15% | -7% | 12% |
| Net Income (M) | $19,370 | $13,903 | -$5,176 | $20,081 | -$8,524 | $14,400 |
| Net Interest Expense (M) | $7,957 | $8,422 | $7,727 | $6,716 | $6,108 | $6,704 |
| Depreciation & Amort. (M) | $28,430 | $28,217 | $22,523 | $17,852 | $18,021 | $18,777 |
| Diluted Shares (M) | 6,806 | 7,348 | 7,466 | 7,503 | 7,587 | 7,258 |
| Earnings Per Share | $2.85 | $1.89 | -$0.75 | $2.73 | -$1.13 | $1.97 |
| EPS Growth | n/a | -33.68% | -139.68% | 464.0% | -141.39% | 274.34% |
| Avg. Price | $17.99 | $19.55 | $18.98 | $18.35 | $17.72 | $20.97 |
| P/E Ratio | 6.31 | 10.29 | -25.31 | 6.62 | -15.68 | 10.64 |
| Free Cash Flow (M) | $22,351 | $29,033 | $28,440 | $26,412 | $16,186 | $20,461 |
| CAPEX (M) | $21,251 | $19,635 | $14,690 | $15,545 | $19,626 | $17,853 |
| EV / EBITDA | 5.17 | 5.27 | 9.24 | 6.57 | 19.26 | 6.63 |
| Total Debt (M) | $176,505 | $163,147 | $157,245 | $175,631 | $135,890 | $137,331 |
| Net Debt / EBITDA | 3.14 | 2.73 | 4.83 | 3.58 | 9.84 | 3.09 |
| Current Ratio | 0.8 | 0.79 | 0.82 | 1.61 | 0.59 | 0.71 |
AT&T has declining revenues and a flat capital expenditure trend, declining EPS growth, and not enough current assets to cover current liabilities because its current ratio is 0.71. On the other hand, the company has strong operating margins with a stable trend working in its favor. Furthermore, AT&T has positive cash flows and significant leverage levels.
