We've been asking ourselves recently if the market has placed a fair valuation on American Tower. Let's dive into some of the fundamental values of this Large-Cap Real Estate company to determine if there might be an opportunity here for value-minded investors.
American Tower's Valuation Is in Line With Its Sector Averages:
American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of over 224,000 communications sites and a highly interconnected footprint of U. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 31.12 and an average price to book (P/B) ratio of 2.15. In contrast, American Tower has a trailing 12 month P/E ratio of 43.8 and a P/B ratio of 23.34.
American Tower has moved -16.9% over the last year compared to 25.9% for the S&P 500 — a difference of -42.8%. American Tower has a 52 week high of $243.56 and a 52 week low of $170.46.
The Firm Has a Highly Leveraged Balance Sheet:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $7,440 | $7,580 | $8,042 | $9,357 | $10,711 | $11,144 |
| Operating Margins | 26% | 35% | 36% | 33% | 22% | 27% |
| Net Margins | 17% | 25% | 21% | 27% | 16% | 12% |
| Net Income (M) | $1,236 | $1,888 | $1,691 | $2,568 | $1,697 | $1,367 |
| Diluted Shares (M) | 443 | 446 | 446 | 453 | 463 | 467 |
| Earnings Per Share | $2.77 | $4.24 | $3.79 | $5.66 | $3.82 | $3.18 |
| EPS Growth | n/a | 53.07% | -10.61% | 49.34% | -32.51% | -16.75% |
| Avg. Price | $130.43 | $185.86 | $224.49 | $245.96 | $238.46 | $181.87 |
| P/E Ratio | 46.75 | 43.53 | 58.92 | 43.23 | 62.26 | 57.19 |
| Free Cash Flow (M) | $2,835 | $2,761 | $2,850 | $3,443 | $1,823 | $2,924 |
| CAPEX (M) | $913 | $991 | $1,032 | $1,377 | $1,874 | $1,798 |
| EV / EBITDA | 18.6 | 22.75 | 26.45 | 26.72 | 24.68 | 19.38 |
| Total Debt (M) | $18,405 | $21,127 | $28,498 | $38,686 | $34,156 | $35,734 |
| Net Debt / EBITDA | 4.28 | 4.39 | 5.61 | 6.72 | 5.63 | 5.52 |
| Current Ratio | 0.51 | 0.47 | 0.79 | 0.41 | 0.44 | 0.51 |
American Tower has growing revenues and increasing reinvestment in the business, positive EPS growth, and generally positive cash flows. However, the firm suffers from not enough current assets to cover current liabilities because its current ratio is 0.51 and a highly leveraged balance sheet. Finally, we note that American Tower has decent operating margins with a stable trend.
