Worth Calling Home About: T-Mobile's Post-4Q15 Earnings Outlook
Valuation multiples of T-Mobile
We’ve already looked at T-Mobile’s (TMUS) performance in 2015 and outlook for 2016. Now let’s analyze the value-centric parameters of T-Mobile among peers in the US wireless space, particularly Verizon Communications (VZ), AT&T (T), T-Mobile, and Sprint (S).
T-Mobile had a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) of ~5.1x as of February 23, 2016. For Sprint, the comparable valuation metric was at ~5.3x, whereas Verizon and AT&T had EV-to-EBITDA metrics of ~6.7x and ~6.3x, respectively, as of the same date.
T-Mobile’s relative scale of operations
As of February 23, 2016, AT&T was the largest global telecom player by market capitalization. Verizon was the second-larger player in this metric in the US. It’s worth noting here that both AT&T and Verizon have significant wireline operations.
As we can see in the above graph, as of February 23, among the top four US wireless players, T-Mobile was the third-largest company by market capitalization. Moreover, Sprint’s market cap was lower than that of T-Mobile as of the same date.
Instead of taking direct exposures to the stocks of players in the US telecom industry, you might consider taking a diversified exposure to the space by investing in the SPDR S&P 500 ETF (SPY), which held a total of ~2.4% in these and other US telecom companies at the end of December 2015.
In the next and final part of this series, we’ll look at analyst recommendations for T-Mobile after 4Q15.
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