How Charter’s Valuation Multiples Look after Q2 Results



Stock returns

Charter (CHTR) reported upbeat second-quarter results, which pushed its stock up 3.6% on July 31. Notably, Charter generated negative returns of ~22.28% in the trailing-12-month period and ~3.88% in the trailing-one-month period. Charter’s stock price has risen ~7.88% in the trailing-five-day period. Like Charter, its peers Sprint (S), T-Mobile (TMUS), and AT&T (T) also generated negative returns of ~31.95%, ~2.69%, and ~18.03%, respectively, in the trailing-12-month period. However, Verizon (VZ) posted positive returns of 6.69% in the same period.

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Valuation metrics for Charter

Valuation metrics consist of price-based multiples and earnings-based multiples. On July 31, Charter had a trailing EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 5.03x in comparison to the multiples of its closest peers. AT&T, Verizon, Sprint, and T-Mobile had EV-to-EBITDA multiples of 8.57x, 7.28x, 4.85x, and 7.43x, respectively.

Charter expects its EV-to-EBITDA in 2018 to be 5.18x, while in 2019, the multiple is expected to be 9.84x. Charter is now trading at a PE (price-to-earnings) multiple of 98.32x. In 2018, the PE multiple is expected to reach 71.96x, while in 2019, the multiple is anticipated to be at 41.51x.

Market cap of mobile network providers

On July 31, Charter’s market cap was ~$72.4 billion. In comparison, Verizon’s market cap was ~$216.9 billion, making it the second-largest US wireless service provider according to market cap after AT&T, which had a market cap of ~$234.4 billion. While Sprint had a market cap of ~$22.0 billion, T-Mobile had a market cap of ~$50.8 billion.


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