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Understanding T-Mobile’s Valuation before Its 3Q17 Results

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T-Mobile’s scale

As of October 11, 2017, T-Mobile’s (TMUS) market capitalization was ~$50.8 billion, making it the third-largest US wireless carrier. By comparison, Verizon (VZ) had a market capitalization of ~$199.3 billion, while AT&T’s (T) market capitalization was ~$234.5 billion, and Sprint’s (S) market capitalization was ~$28.7 billion.

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Bollinger band

In the October 11 trading session, T-Mobile stock closed at $61.18, which is near its Bollinger Band mid-range level of $62.25. This suggests that T-Mobile’s stock is neither overbought nor oversold.

Short interest ratio

As of October 11, 2017, T-Mobile’s short interest as a percentage of its float (or short interest ratio) was ~7.1%. Generally, if the stock’s short interest ratio is more than 40%, it means that the traders and investors anticipate fall in the stock’s price.

T-Mobile’s valuation metrics

As of October 11, 2017, T-Mobile was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization) multiple of 6.94x. By comparison, AT&T, Sprint, and Verizon had forward EV-to-EBITDA multiples of 6.62x, 5.22x, and 6.84x, respectively, as of the same date.

As of October 11, T-Mobile was trading at a PE (price-to-earnings) multiple of ~23.6x, compared with AT&T’s, Sprint’s, and Verizon’s PE multiples of ~12.8x, ~140.9x, and ~12.8x, respectively.

Continue to the next and final part of this series for a look at analyst recommendations.

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