Valuation metrics for AT&T
Previously in this series, we looked at some of the key factors regarding AT&T’s (T) proposed acquisition of Time Warner (TWX). Now we’ll look at AT&T’s value proposition among select global telecom giants.
On November 18, 2016, AT&T had a market capitalization of $231.5 billion, as you can see in the graph below. Verizon Communications (VZ) and T-Mobile (TMUS) had market capitalization of $197.2 billion and $44.2 billion, respectively.
AT&T’s earnings multiples
Let’s look at AT&T’s (T) valuation multiple compared to other global telecom players. AT&T was trading at a current year’s PE (price-to-earnings) multiple of ~15.9x on November 18, 2016. This figure is higher than Verizon Communications’s (VZ) comparable PE multiple of ~14.0x.
In the US telecom space, T-Mobile (TMUS) had a PE multiple of ~33.8x on November 18, 2016.
Enterprise value multiples for AT&T and some global peers
Now let’s move on to AT&T’s EV (enterprise value) multiples. The carrier’s current year’s EV-to-EBITDA[1. earnings before interest, tax, depreciation, and amortization] multiple was ~6.5x on November 18, 2016, which was higher than Sprint’s (S) multiple of ~6x.
Remember, instead of investing directly in AT&T stock, you can consider diversified exposure to the company by investing in ETFs such as the SPDR S&P 500 ETF (SPY). AT&T makes up 1.2% of SPY.