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Why Sprint’s Current Valuation Matters Now

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Sprint’s scale

As of July 3, 2017, Sprint’s (S) market capitalization was ~$32.6 billion, making it the fourth-largest US telecom company in terms of market cap. By contrast, competitor AT&T (T) has a market cap of ~$234.3 billion, while Verizon Communications’ (VZ) market cap is ~$183.6 billion, and T-Mobile’s (TMUS) is ~$49.9 billion.

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Bollinger Band and short interest ratio

In the July 3 trading session, Sprint stock closed at $8.15, which was closer to its Bollinger Band midrange of $8.20. This implies that Sprint’s stock is neither overbought nor oversold.

Sprint’s short interest ratio (or short interest as a percentage of float) on July 3, 2017, was ~7.4%. Generally, if a stock’s short interest ratio is above 40%, it implies that the investors can anticipate its price to decrease.

Sprint’s valuation metrics

Sprint has an EV-to-EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization) multiple of 5.69x. By contrast, AT&T, T-Mobile, and Verizon have EV-to-EBITDA multiples of 6.63x, 6.41x, and 6.60x, respectively.

Valuation metrics largely consist of enterprise value-based multiples as well as price-based multiples. Sprint is trading at a PE (price-to-earnings) multiple of 96.39x, while AT&T, T-Mobile, and Verizon have PE multiples of 12.88x, 23.95x, and 11.84x, respectively.

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