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A Closer Look at AT&T’s Valuation Ratios

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AT&T’s forward PE ratio

AT&T (T) stock has fallen significantly year-to-date. This trend has made the stock cheaper. As of December 7, AT&T has a forward PE ratio of 8.6x in 2018, and its expected PE ratio for 2019 is 8.4x. The forward PE ratios of Verizon (VZ), T-Mobile (TMUS), and Sprint (S) are 12.4x, 19.8x, and 92.1x, respectively, in their current years. On the basis of this multiple, AT&T stock is trading at a discount to its rivals.

A company’s PE multiple tells us the amount investors are willing to pay per dollar of its EPS. It’s the simplest and most common valuation multiple. The forward PE ratio takes a company’s future earnings into consideration.

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AT&T’s forward EV-to-EBITDA multiple

As of December 7, AT&T has estimated EV-to-EBITDA (enterprise value-to-EBITDA) multiples of 7.0x and 6.5x, respectively, for 2018 and 2019. The forward EV-to-EBITDA ratios of Verizon, T-Mobile, and Sprint are 7.4x, 7.1x, and 4.4x, respectively, in their current years. On the basis of this multiple, AT&T stock is trading at a discount to all of its rivals except for Sprint.

A company’s EV comprises its market cap and its net debt. A company’s forward EV-to-EBITDA multiple is based on analysts’ EBITDA estimates.

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