How Are US Telecom Players Stacking up This February?
Which multiple to consider?
In this final part of our series on how US telecommunications stocks are reacting to the recent fall on Wall Street, we’ll take a look at some of the key metrics used by traders and investors to compare the values of major companies in the US telecom sector.
The PE (price-to-earnings) and EV-to-EBITDA (enterprise value-to-earnings before interest, tax, depreciation, and amortization) multiples are the most popular valuation parameters. These are forward multiples that are based on expected values after one year.
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As of February 9, 2018, T-Mobile (TMUS) was trading at a forward EV-to-EBITDA multiple of ~6.2x, while AT&T (T) was trading at a multiple of ~6.4x, and Sprint (S) was trading at a multiple ~4.5x.
Verizon Communications (VZ) had the highest premium in this metric as of February 9, trading at a forward EV-to-EBITDA multiple of ~6.6x. In the US wireline space, Frontier Communications (FTR) was trading at a forward EV-to-EBITDA multiple of ~5.1x as of the same date.
As of February 9, 2018, Verizon was trading at a forward PE multiple of ~10.7x, while AT&T was trading at a PE multiple of ~10.5x, and T-Mobile was trading at a PE multiple of ~14.5x.
Short interest ratio
On February 9, 2018, Verizon stock’s short interest ratio (or short interest as a percentage of float) was ~2.30%. By comparison, peers AT&T and T-Mobile had short interest ratios of ~6.50% and ~2.67%, respectively, as of the same date.
Sprint stock’s short interest ratio was ~6.71% as of February 9, while Frontier stock’s short interest ratio was ~11.12%.
Remember, when a stock’s short interest ratio is higher than 40%, it suggests that investors and traders are anticipating a fall in the stock’s price.
For ongoing updates on these telecommunications stocks and on the broader industry, keep checking in with Market Realist’s Tech & Telecom page.