5
T-Mobile US, Inc. (TMUS)
- Equity
- US
- Communication Services
RISK
RETURN
Key risk factors
Negligible price volatility
Strong & resilient to price shocks
Good trading liquidity
Key return factors
Overvalued vs peers
Somewhat favourable analyst view
Modest dividends
Corporate actions & dividendsDividend of USD 0.650 with an ex-date of 30 May 2024.
Company profileT-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 offers voice, messaging, and data services to 108.7 million customers in the postpaid, prepaid, and wholesale markets. It also provides wireless devices, including smartphones, wearables, and tablets and other mobile communication devices, as well as wireless devices and accessories. In addition, the company offers services, devices, and accessories under the T-Mobile and Metro by T-Mobile brands through its owned and operated retail stores, T-Mobile app and customer care channels, and its websites. It also sells its devices to dealers and other third-party distributors for resale through independent third-party retail outlets and various third-party websites. As of December 31, 2021, it operated approximately 102,000 macro cell and 41,000 small cell/distributed antenna system sites. The company was founded in 1994 and is headquartered in Bellevue, Washington.
Valuation: Overvalued
Multiple
TTM
NTM
P/E
22.30
18.50
PEG
1.30
-
P/B
3.20
2.70
P/S
2.50
2.40
P/FCF
21.10
-124.90
EV/EBITDA
10.80
14.30
From both historical and forecast perspectives, the stock is overpriced compared to similar stocks. Specifically, the stock is fairly valued on P/E, overvalued on EV/EBITDA, and overpriced on P/FCF.
Performance: Mixed
The stock has been growing steadily in the past six months, adding 12% in total. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 7ppts over past six months and grown 1ppts slower in the past month. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 7ppts over the past six months and grew 0ppts faster in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Somewhat favourable
The average target price is 176 and suggests 7% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 235.0. This translates into 42% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 138.0. This is equivalent to 16% downside potential in the worst case.
Profitability: Average
RoE
T-Mobile US, Inc. reported a return on equity (RoE) of 13.8% in the last 12 months, up from 12.4% in FY23. The market consensus projects an RoE of 15.5% in FY24, this time above its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 4.2% in the last 12 months, an increase from 4.0% in FY23. The market analysts predict that RoA will be 4.8% in FY24, again weaker than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) grew to 4.7%, below the peers. The consensus estimate for FY24 for RoCE is 9.3%, again behind the peers.
Net margin
EBITDA margin
Historically, TMUS has reported good net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 11.1%, a growth from 10.6% in FY23. The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 35.8% in the last 12 months, up from 34.5% in FY23.
RoIC / WACC = 0.9(poor value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.9 in the past several years. This ratio implies a poor shareholder value creation. Growth: Average
Revenue
EBITDA
EPS
Free cash flow
TMUS reported revenue of USD 78 520mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 6% from FY23 to USD 7.43. Market expects EPS to reach USD 8.99 in FY24.Revenue has been growing very slowly over the past several years (middle negative), while EBITDA growth has been weak. This all contributed to very fast EPS growth (strongly positive). FCF has fallen rapidly, far faster than EBITDA. We emphasize the highly volatile dynamics of FCF and EPS. On the positive side, revenue dynamics is very stable.
Dividends: Modest
The company pays dividends on rare occasions. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been low and below its peers.
Default risk: Considerable
The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, and an unfavourable capital structure. We note robust profitability, among the positive credit factors.
Volatility: Negligible
In normal market circumstances, TMUS is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible.
Stress-test: Negligible
In highly turbulent market conditions, TMUS is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.
Selling difficulty: Low
TMUS boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.