T-Mobile US, Inc.’s stock price has surged to a price of $273.1 today. Ending the day with a 3.0% increase, TMUS shares outperformed the S&P500 and Dow Industrial composite indices by 3.0% and None% respectively, closing in on their 52 week high of $273.14 Over the last 12 months, T-Mobile US is up 61.8%, and has outperformed the S&P 500 by 43.2%. Now, the Large-Cap Telecommunications company is 7.59% above its average target price of $253.83 and has an average analyst rating of buy.
T-Mobile US's trailing 12 month price to earnings (P/E) ratio is 28.3, which is its share price divided by its trailing earnings per share (EPS) of $9.65. The company has a forward P/E ratio of 25.6 based on its forward EPS of $10.67 -- which is an estimate of future earnings provided by management. The P/E ratio tells us how much investors are willing to pay for each dollar of the company's net earnings from its sales operations. By way of comparison, the average P/E ratio of the Telecommunications sector is 20.57, but a company's price can remain stable for a long time even if it is over or undervalued.
Another metric for valuing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present value of the company if it were liquidated today (i.e. selling all assets and paying off all debts). T-Mobile US's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 5.0, so the company's assets may be overvalued compared to the average P/B ratio of the Telecommunications sector, which stands at 2.36.
TMUS's average free cash flow over the last few years is $1.59 Billion, which represents the sum of inflows and outflows of cash from all sources, including capital expenses.. This is the pool of liquidity that the company can use to reinvest in its business or pay out to its equity investors in the form of a dividend. Over the last twelve months investors in T-Mobile US have enjoyed a dividend yield of 1.2%.
Since it has a a higher P/E ratio than its sector average, a higher than Average P/B Ratio, generally positive cash flows, and strong operating margins, T-Mobile US is probably undervalued at current prices. Make sure to complement this brief quantitative review with a qualitative analysis of your own!