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A Closer Look at T-Mobile’s Valuation Ratio

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T-Mobile’s scale

As of December 20, T-Mobile’s (TMUS) market capitalization was $54.5 billion, making it the third-largest US wireless service provider in terms of market capitalization. In comparison, AT&T’s (T), Verizon’s (VZ), and Sprint’s (S) market caps were $208.5 billion, $227.6 billion, and $24.4 billion, respectively. Market capitalization represents a company’s market value, which is its shares outstanding multiplied by its stock price.

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Forward EV-to-EBITDA ratio

On December 20, T-Mobile had a trailing-12-month EV-to-EBITDA (enterprise value-to-earnings before interest, tax, depreciation, and amortization) ratio of ~7.35x as compared to the multiples of its closest rivals. Verizon, AT&T, and Sprint had trailing-12-month EV-to-EBITDA multiples of ~7.26x, ~7.21x, and ~4.64x, respectively. T-Mobile anticipates its EV-to-EBITDA in 2018 to be ~6.86x, while in 2019, the multiple is anticipated to be ~6.44x.

Forward PE ratio

The price-to-earnings (or PE) ratio of a company tells us the amount investors are willing to pay per dollar of earnings per share. T-Mobile is currently trading at a PE multiple of ~20.11x, which is higher than Verizon and AT&T at ~14.69x and ~14.28x, respectively. T-Mobile’s forward PE ratio for fiscal 2018 is ~19.39x and is estimated at ~15.92x in fiscal 2019. By comparison, AT&T and Verizon have forward PE ratios of ~8.14x and ~11.81x, respectively, in their current fiscal years.

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