AT&T Inc (T, Financial) recently experienced a daily loss of 1.77%, although it has gained 16.72% over the past three months. With a reported Loss Per Share of $1.54, investors are keenly asking: is the stock fairly valued? This article aims to answer that question by diving into AT&T's valuation, encouraging readers to explore the following analysis for a comprehensive understanding.
Company Introduction
AT&T Inc (T, Financial) is a telecommunications giant, with the wireless business making up approximately two-thirds of its revenue post the Warner Media spinoff. As the third-largest U.S. wireless carrier, it connects millions of customers, while also offering fixed-line enterprise and residential services, and maintaining a presence in Mexico. With a current stock price of $16.62, a market cap of $118.80 billion, and a GF Value of $16.04, we set the stage to delve deeper into the company's intrinsic value.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, incorporating historical trading multiples, an adjustment factor based on past performance, and future business estimates. If AT&T's stock price significantly deviates from the GF Value Line, it could indicate an overvaluation or undervaluation, affecting potential future returns. Currently, AT&T (T, Financial) is considered fairly valued, suggesting that its stock price may align closely with its business growth over time.
Financial Strength
Investors should consider a company's financial strength to avoid the high risk of permanent capital loss. AT&T's cash-to-debt ratio stands at 0.05, ranking lower than many of its industry peers. With an overall financial strength score of 4 out of 10, AT&T's financial position is deemed poor, which is an important factor for investors to ponder.
Profitability and Growth
Investing in profitable companies, especially those with consistent performance, is generally less risky. AT&T has shown profitability 8 out of the past 10 years, with a solid operating margin of 20.09%. However, when it comes to growth, the company's 3-year average annual revenue growth rate is lagging, potentially impacting its valuation.
ROIC vs WACC
Evaluating AT&T's profitability involves comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). A ROIC that exceeds the WACC suggests that the company is creating value for shareholders. AT&T's ROIC over the past 12 months is 10.01, outperforming its WACC of 5.6.
Conclusion
In conclusion, AT&T (T, Financial) appears to be fairly valued considering its market performance and financial metrics. While the company's financial strength is not robust, its profitability is reasonable, and its growth rate poses challenges. For a deeper dive into AT&T's financials, interested parties can review the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
