What Does T-Mobile’s Valuation Trend Indicate?

As of August 13, T-Mobile’s (TMUS) market capitalization was ~$55.7 billion, making it the third-largest US mobile carrier in terms of market capitalization. In comparison, AT&T (T) had a market capitalization of ~$233.9 billion, Verizon’s (VZ) market capitalization was ~$215.8 billion, and Sprint’s (S) market capitalization was ~$24.7 billion.

In the August 13 trading session, T-Mobile stock closed at $65.70, which is near its upper Bollinger Band level of $67.00. This suggests that T-Mobile stock is overbought.

Valuation metrics include earnings-based multiples and price-based multiples. On August 13, T-Mobile had a trailing-12-month EV-to-EBITDA (enterprise value-to-earnings before interest, tax, depreciation, and amortization) multiple of ~7.8x. In comparison, AT&T, Verizon, and Sprint had trailing-12-month EV-to-EBITDA multiples of ~8.5x, ~7.1x, and ~4.9x, respectively. T-Mobile expects its EV-to-EBITDA in 2018 to be ~7.1x, while in 2019, the multiple is expected to be ~6.6x.

T-Mobile is currently trading at a price-to-earnings (or PE) multiple of ~22.8x, which is higher than Verizon and AT&T at ~15.2x and ~17.4x, respectively. In 2018, T-Mobile’s PE multiple is expected to be ~20.5x. For 2019, it’s expected to be ~16.6x.