Posts tagged " Communication "

AT&T Inc (T) Extended Graph Analysis

October 19th, 2020 Posted by Extended Analysis No Comment yet

Company Profile

AT&T logo

AT&T is a global networking company, a broadband connectivity provider. The company has two segments, the business services, and consumer services business which provides domestic and international long-distance telephone services. The business services segment includes global communications services with three million customers from small to large businesses.

AT&T (T) Extended Graph Analysis

1. AT&T CASH FLOWS

AT&T CASH FLOWS

2015 2016 2017 2018 2019 2020
Net cash flow provided by operating activitIes 35,880,000,000 39,340,000,000 39,150,000,000 43,600,000,000 48,670,000,000 44,260,000,000
Net cash used for investing activities -49,140,000,000 -24,220,000,000 -20,370,000,000 -63,150,000,000 -16,690,000,000 -19,670,000,000
Net cash provided by (used for) financing activities 9,780,000,000 -14,460,000,000 25,930,000,000 -25,990,000,000 -25,080,000,000 -16,210,000,000
Capital expenditure -19,218,000,000 -21,516,000,000 -20,647,000,000 -20,758,000,000 -19,435,000,000 -18,265,000,000
Free cash flow 16,662,000,000 17,828,000,000 18,504,000,000 22,844,000,000 29,233,000,000 25,992,000,000
Working Capital -11,824,000,000 -12,207,000,000 -2,243,000,000 -12,993,000,000 -14,150,000,000 -14,150,000,000

Facts:

  • Cash provided by operating activities was $44 billion in the trailing twelve months.
  • Net cash used for investing activities was -$19.7 billion in the trailing twelve months.
  • Cash provided by (used for) financing activities was -$16 billion in the trailing twelve months.
  • Capital expenditures were -$18 billion in the trailing twelve months.
  • Free cash flow was $26 billion in the trailing twelve months.
  • Working capital was -$14 billion in the trailing twelve months.

Explanation

  • Cash from operation grew 23 percent in five years However, in 2020 trailing twelve months it fell 9 percent from 2019.
  • Cash from investing activities was purchases of property, plant, and equipment, and purchase and acquisition of a business.
  • Net cash from financing activities was insurance and repayment and cash dividends paid
  • Capital expenditures were purchases of property, plant, and equipment.
  • Free cash flow grew 56 percent in five years.
  • Working capital was negatively impacted in the last five years due of current liabilities was higher than the current assets.

Interpretation

The company has managed to generate positive cash flow from operation in the last five years and was able to produce free cash flows. However, due to the higher liabilities than that of the current assets, working capital was negative from 2015 to 2020 trailing twelve months.

2. AT&T BALANCE SHEET

AT&T BALANCE SHEET

2015 2016 2017 2018 2019
Total cash 5,120,000,000 5,790,000,000 50,500,000,000 5,200,000,000 12,130,000,000
Current Assets 5,990,000,000 38,370,000,000 79,150,000,000 51,430,000,000 54,760,000,000
Net property, plant and equipment 124,450,000,000 124,900,000,000 125,220,000,000 131,470,000,000 154,170,000,000
Total non-current assets 366,680,000,000 365,450,000,000 364,950,000,000 480,440,000,000 496,910,000,000
Total assets 402,670,000,000 403,820,000,000 444,100,000,000 531,860,000,000 551,670,000,000
Current liabilities 47,820,000,000 50,580,000,000 81,390,000,000 64,420,000,000 68,910,000,000
Non-current liabilities 231,220,000,000 229,140,000,000 220,700,000,000 273,560,000,000 280,820,000,000
Total liabilities 279,030,000,000 279,710,000,000 302,090,000,000 337,980,000,000 349,740,000,000
Retained earnings 33,670,000,000 34,730,000,000 50,500,000,000 58,750,000,000 57,940,000,000
Stockholders equity 123,640,000,000 124,110,000,000 142,010,000,000 193,880,000,000 201,930,000,000

Facts:

  • The total cash was $12 billion in 2019.
  • Current assets were $55 billion in 2019.
  • Net property, plant, and equipment were $154 billion in 2019.
  • Total non-current assets were $497 billion in 2019.
  • Total assets were $552 billion in 2019.
  • Current liabilities were $69 billion in 2019.
  • Non-current liabilities were $281 billion in 2019.
  • Total liabilities were $350 billion in 2019.
  • Retained earnings were $58 billion in 2019.
  • Stockholders’ equity was $202 billion in 2019.

Explanation:

  • Total cash represents 22 percent of current assets.
  • Current assets represent 10 percent of total assets.
  • Net property, plant, and equipment represent 28 percent of the total assets.
  • Total non-current assets represent 90 percent of the total assets.
  • Current liabilities represent 20 percent of the total liabilities.
  • Non-current liabilities represent 80 percent of total liabilities.
  • Total liabilities represent 63 percent of the total liabilities and stockholders’ equity.
  • Retained earnings represent 29 percent of the total liabilities and stockholders’ equity.
  • Stockholders’ equity represents 37 percent of the total liabilities and stockholders’ equity.

Interpretation

The company doesn’t have enough liquid to meet its current obligation when the due date comes. The company’s non-current assets consist of buildings and improvements, and machinery, furniture, and equipment.

3. AT&T INCOME AND MARKET

AT&t INCOME AND MARKET

2015 2016 2017 2018 2019 2020
Revenue 146,800,000,000 163,790,000,000 160,550,000,000 170,760,000,000 181,190,000,000 175,140,000,000
EBIT 24,790,000,000 24,710,000,000 23,860,000,000 26,140,000,000 29,410,000,000 28,140,000,000
Net Income 13,350,000,000 12,980,000,000 29,450,000,000 19,370,000,000 13,900,000,000 11,900,000,000
EBITDA 46,830,000,000 50,570,000,000 45,830,000,000 61,260,000,000 55,110,000,000 53,400,000,000
Market Capitalization 149,054,400,000 201,513,840,000 203,544,360,000 174,165,540,000 273,713,000,000 202,208,000,000
Intrinsic Value 312,600,772,000 310,192,761,000 522,407,000,000 353,617,252,870 569,184,000,000 786,467,000,000

Facts:

  • Asset turnover was averaging $0.32 in the trailing twelve months.
  • Return on assets was 2.17 percent in the trailing twelve months.
  • Return on equity was 6.61 percent in the trailing twelve months.
  • Return on invested capital was 4.94 percent in the trailing twelve months.
  • Debt/Equity was a 1.00 ratio in the trailing twelve months.

Explanation:

  • Asset turnover indicates that for every dollar in the asset, the company generated 32 cents of sales.
  • Return on assets indicates that the company generated 02.17 cents of net income for every dollar in assets.
  • Return on equity indicates that the company generated 6.61 cents of net income for every dollar in common shareholders equity.
  • Return on invested capital indicates that the return on its capital investment was 4.94 percent or 4.94 cents.
  • Debt/Equity means that the investors and creditors have an equal stake in the business assets.

Interpretation

Financial ratios show that the company is generating profits for every dollar invested in assets and equity. The debt to equity ratio was not bad, hence investors and creditors have an equal stake in the assets of the company.

4. AT&T FINANCIAL RATIOS

AT&T FINANCIAL RATIOS

2015 2016 2017 2018 2019 2020
Asset turnover (average) 0.42 0.41 0.38 0.35 0.33 0.32
Return on assets % 3.84 3.22 6.95 3.97 2.57 2.17
Return on equity % 12.77 10.56 22.31 11.92 7.55 6.61
Return on invested capital % 7.70 6.57 12.04 7.74 5.68 4.94
Debt/Equity 0.97 0.92 0.89 0.90 0.94 1.00

Facts:

  • Asset turnover was averaging $0.32 in the trailing twelve months.
  • Return on assets was 2.17 percent in the trailing twelve months.
  • Return on equity was 6.61 percent in the trailing twelve months.
  • Return on invested capital was 4.94 percent in the trailing twelve months.
  • Debt/Equity was a 1.00 ratio in the trailing twelve months.

Explanation:

  • Asset turnover indicates that for every dollar in the asset, the company generated 32 cents of sales.
  • Return on assets indicates that the company generated 02.17 cents of net income for every dollar in assets.
  • Return on equity indicates that the company generated 6.61 cents of net income for every dollar in common shareholders equity.
  • Return on invested capital indicates that the return on its capital investment was 4.94 percent or 4.94 cents.
  • Debt/Equity means that the investors and creditors have an equal stake in the business assets.

Interpretation

Financial ratios show that the company is generating profits for every dollar invested in assets and equity. The debt to equity ratio was not bad, hence investors and creditors have an equal stake in the assets of the company.

 

5. AT&T KEY EXECUTIVE COMPENSATION

AT&T KEY EXECUTIVE COMPENSATION

2015 2016 2017 2018 2019
Key Executive Compensation
Total 19,639,491 24,347,235 30,211,935 45,044,485 56,226,035
John T. Stankey, Director, President, and CEO
Total 10,040,810 12,765,295 10,094,583 16,552,583 22,473,006
Jefrey S. McElfresh, CEO AT&T Communications LLC
Total 7,676,325
John S. Stephens, Senior EVP, Principal Accounting Officer, and CFO
Total 9,598,681 11,581,940 13,892,807 15,642,304 16,725,328
David R. McAfee, Senior EVP, and General Counsel
Total 6,224,545 12,849,276 9,351,376

Facts:

  • The total key executive compensation in 2015 was $19,639,491.
  • The total key executive compensation in 2016 was $24,347,235.
  • Total key executive compensation in 2017 was $30,211,935.
  • Total key executive compensation in 2018 was $45,044,485.
  • Key executive compensation in 2019 was $56,226,035.

Explanation

  • The total key executive compensation represents 0.40 percent of the net income.
  • The total key executive compensation of John T. Stankey, Director, President, and CEO represents 40 percent of the total key executive compensation.
  • Jeffrey S. McElfresh, CEO AT&T Communications LLC compensation represents 14 percent of the total compensation.
  • The compensation of John S. Stephens, Senior EVP, Principal Accounting Officer, and CFO represents 30 percent of the total key executive compensation.
  • David R. McAfee, Senior EVP, and General Counsel compensation represent 17 percent of the total compensation.

Interpretation

Total executive compensation includes salary, restricted stock award, securities options, non-equity compensation, and other compensation.

 

6. AT&T LOBBYING AND CONTRIBUTIONS

AT&T LOBBYING AND CONTRIBUTIONS

PERIOD AMOUNT
1998 $13,390,000
1999 $23,290,000
2000 $16,320,000
2001 $16,450,000
2002 $14,660,000
2003 $15,820,000
2004 $21,360,000
2005 $23,440,000
2006 $27,450,000
2007 $16,560,000
2008 $15,080,000
2009 $14,730,000
2010 $15,400,000
2011 $20,230,000
2012 $17,460,000
2013 $15,940,000
2014 $14,200,000
2015 $16,370,000
2016 $16,370,000
2017 $16,780,000
2018 $18,523,000
2019 $12,820,000
2020 $6,250,000

Facts:

From 1998 to the current date, AT&T is incurring lobbying and contributions expenditures to politicians. The annual record shows the above.

Explanation:

A note from OpenSecret.org Center for Responsive Politics quoted below:

“NOTE: Figures on this page are calculations by the Center for Responsive Politics based on data from the Senate Office of Public Records. Data for the most recent year was downloaded on April 22, 2020, and includes spending from January 1 – March 31. Prior years include spending from January through December.”

Interpretation

Lobbying and contributions to politicians vary every cycle; it may increase or decrease in amount depending on the attention given by the federal government on the issues of the company.

 

7. AT&T FINANCIAL STRENGTH

AT&T FINANCIAL STRENGTH

DATA:

Working Capital -14,150,000,000
Total Assets 547,900,000,000
Sales 175,140,000,000
EBIT 28,140,000,000
Market value of equity 204,345,000,000
Book value of total liabilities 354,450,000,000
Retained earnings 13,502,000,000

CALCULATION

Ratio Score Result
A – Working Capital / Total Assets -0.03 1.20 -0.03
B – Retained Earnings / Total Assets 0.02 1.40 0.03
C – EBIT / Total Assets 0.05 3.30 0.17
D – Market Value of Equity / Book Value of Total Liabilities 0.58 0.60 0.35
E – Sales / Total Assets 0.32 1.00 0.32
Z-Score 0.84

Formula: Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Explanation:

Z-Score is a statistical measurement that compares data points from different sets of data to find correlations. This measurement by Dr. Edward Altman is a significant measure in determining the financial strength of the company because it relies on different weighted financial liquidity and profitability metrics to come up with the overall score. This measure indicates the probability of bankruptcy.

Interpretation

According to Dr. Altman, a Z-Score of 0 to 1.8 indicates that the company will declare bankruptcy in the future. AT&T suffered negative working capital in the past five years because its current liabilities are higher than the current assets.  The main factors of this statistical measurement are profitability, liquidity, leverage, and efficiency. Visa Inc has strong financial health.

Overview,

The company’s financial strength was not impressive at below a score of 1 which indicates that the company would likely declare bankruptcy in the near future. The score was impacted by the negative working capital due to the debt being higher than its current assets. 

CITATION

https://about.att.com/pages/corporate_profile

http://www.opensecrets.org/orgs/at-t-inc/summary?id=d000000076

https://www.morningstar.com/stocks/xnys/t/quote

Researched and written by Criselda

Telecom Argentina S.A. (ADR) teo

Telecom Argentina S.A. (ADR) A Best BUY?

June 24th, 2013 Posted by Investment Valuation No Comment yet

Telecom Argentina S.A. (ADR) or TEO as their symbol, is one of Argentina’s leading telecommunication companies. As we are aware, wireless data consumption has increased due to the rapid adoption of Smartphones and tablets.  With its increasing revenues year over year for the past five years and with its ample cash, the future seems bright with Telecom Argentina. The company has initiated a long position with its solid cash flows. Telecom Argentina is the principal subsidiary of Nortel Inversora S.A., a holding company that operates out of Buenos Aires, Argentina.

Telecom Argentina Value Investing Approach

This model is prepared in a very simple and easy way to value a company, it adopts the investment style of the Father of Value Investing Benjamin Graham. The essence is that any investment should be purchased at a discount, meaning the true value should be more than the market value. Graham believed in fundamental analysis and was looking for companies with a sound balance sheet and with little debt. The basis for this valuation is the company’s five years of historical financial records, the balance sheet, income statement, and cash flow statement. We calculated first the enterprise value as our first step. We believed this is important because it measures the total value of the company.

Telecom Argentina Investment in Enterprise Value                   

TEO EV

Explanation

The market capitalization of Telecom Argentina was trending at a rate of 28 percent average. The enterprise value was negative during 2012 and the trailing twelve months because its cash and cash equivalent were greater than the total debt at 2640 and 3052 percent, respectively. Its total debt was 46 percent average and its cash and cash equivalent was 187 percent of the enterprise value thus, enterprise value represents only 42 percent of the market value. Buying the entire business of Telecom Argentina is purchasing 100 percent of its equity.

Takeover Price

The takeover price of the entire business of Telecom Argentina to date, June 9, 2013, would be -$738 at -$3.75 per share, meaning zero dollars because the cash and cash equivalent are greater than the total debt. TEO had solid cash and cash equivalent in which the company had initiated its position and strength. The market price to date was $15.89 per share.

Net Current Asset Value (NCAV) Approach    

Benjamin Graham developed and tested the net current asset value (NCAV) approach between 1930 and 1932. Reported that the average return, over a 30-year period, on diversified portfolios of net current asset stocks was about 20 percent. To justify this, an outside study also showed that from 1970 to 1983, an investor could have earned an average return of 29.4 percent by purchasing stocks and holding them for one year.

TEO NCAVPS

Explanation

The table above tells us that the stock price of Telecom Argentina was overvalued because the 66 percent ratio was greater than the market price from 2008 up to the trailing twelve months. The ratio represents only 1 percent of the market price. The results further indicate that the stock price was expensive because the stock was trading above the liquidation value of Telecom Argentina.

Market Capitalization/Net Current Asset Value (MC/NCAV) Valuation   

By calculating market capitalization over the net current asset value of the company, we can determine if the stocks are trading over or undervalued. The result should be less than 1.2 ratios.

Market Capitalization / NCAV = Result (must be lesser than 1.2)

TEO MC NCAV

Explanation

The stock price of Telecom Argentina was overvalued because the ratios exceeded the 1.2 ratios for the period 2008 up to the trailing twelve months.

A formula to be used is the Margin of Safety = Enterprise Value – Intrinsic Value. The table below shows the TEO’s historical calculation for the margin of safety.

TEO MOS

The result of the above calculations indicates that the average margin of safety was 98 percent average.  The margin of safety was high during 2012 and the trailing twelve months due to the enterprise which is negative. The average enterprise value was $6.46 while the intrinsic value was $550 average.  The formula for intrinsic value was as follows:

Intrinsic Value = Current Earnings x (9 + 2 x Sustainable Growth Rate)  

TEO IV

Explanation

As seen in the table above, the intrinsic value factors the earnings per share and the growth of the company. The average earning per share as per the calculations above was $10.41 and the sustainable growth rate was 22.80 percent average while the average annual growth rate was 55 percent.

The term earnings per share (EPS) represent the portion of a company’s earnings, net of taxes and preferred stock dividends, that is allocated to each share of common stock. The figure can be calculated simply by dividing net income earned in a given reporting period by the total number of shares outstanding during the same term. The formula is:

EPS

Sustainable Growth Rate

While the sustainable growth rate (SGR) shows how fast a company can grow using internally generated assets without issuing additional debt or equity. In getting the sustainable growth rate for a company, you need to know how profitable the company is as measured by its return on equity (ROE). You also need to know what percentage of a company’s earnings per share is paid out in dividends, which is called the dividend payout ratio. From there, multiply the company’s ROE by its plow back ratio, which is equal to 1 minus the dividend payout ratio. For the shorter version of the process above, here’s the formula:

Sustainable growth rate = ROE x (1 – dividend-payout ratio).

TEO SGR

Explanation

The return on equity was a 30.49 percent average, while the payout ratio was 24 percent average. TEO has zero payout ratios during 2008 and 2009 because the company did not pay cash dividends during those periods to its shareholders.

ROE

There are two ways of calculating the sustainable growth rate and that is by using the relative and the average approach.  The calculations above were the results of the relative approach. But to see how the two approaches differ.

TEO Relative

As shown above, the margin of safety using the average approach has the same results as by using the relative approach. For the growth, they have only a little difference.

I have prepared a graph for us to fully understand the relationship between a price and the true value of the stock.

TEO Graph

Explanation

As we can see in the graph, the intrinsic value line or the true value line drops at a rate of 20 percent, then up by 75 percent in 2011 and remain stable during 2012 and the trailing twelve months. Comparing the trend to the revenue of TEO, its revenue reached 92 percent during 2012 and the trailing twelve months.  If we will get the average of MOS from 2008 to the trailing twelve months we will get 98 percent, this represents the space in between the two lines.

Telecom Argentina Relative Valuation Methods  

The relative valuation methods for valuing a stock is to compare market values of the stock with the fundamentals (earnings, book value, growth multiples, cash flow, and other metrics) of the stock.

Price to Earnings/Earning Per Share (P/E*EPS)    

This valuation will determine whether the stocks are undervalued or overvalued by multiplying the Price to Earnings (P/E) ratio with the company’s relative Earning per Share (EPS) and comparing it to the enterprise value per share, we can determine the status of the stock price.

TEO PE EPS

Explanation

The stock was trading at an undervalued price because the P/E*EPS ratio was higher than the enterprise value. The P/E*EPS was 1442 percent of the enterprise value.

The other method of calculating the P/E*EPS valuation is by using the average approach. The table below will show us the difference.  

TEO Relative PE

The calculation above shows that the price to earnings was higher in relative approach than by using the average approach. The average price to earnings was $8.53.

The Enterprise value (EV) /Earning per Share (EPS) or (EV/EPS)      

The use of this ratio is, to separate price and earnings in the enterprise value. By dividing the enterprise value of projected earnings (EPS), the result represents the price (P/E) and the difference represents the earnings (EPS).

TEO EV EPS

Explanation

The EV/EPS valuation indicates that the price (P/E) that was separated from the enterprise value was 15 percent average. And the remaining 85 percent represents the earnings (EPS).  This might indicate that the stock was trading at an undervalued price.

Enterprise Value (EV) / Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) or (EV/EBITDA)     

This metric is used in estimating business valuation. It compares the value of the company inclusive of debt to the actual cash earnings exclusive of non-cash expenses. This metric is useful for analyzing and comparing profitability between companies and industries. It tells us how long it would take for the earnings pay off the price of buying.

TEO EV EBITDA

The EV/EBITDA tells us that it will take 3 years to cover the cost of buying the entire business. In other words, it will take 3 times of the cash earnings of the company to recover the purchase price.

The Summary

The enterprise value was negative during 2012 and the trailing twelve months. Due to its cash and cash equivalent were greater than the total debt. Its total debt was 46 percent average and its cash and cash equivalent was 187 percent of the enterprise value. Buying the entire business of Telecom Argentina is purchasing 100 percent of its equity.

The takeover price of the entire business to date, June 9, 2013, was -$738 at -$3.75 per share. Meaning zero dollars because the cash and cash equivalent are greater than the total debt. Telecom Argentina had solid cash and cash equivalent in which the company had initiated its position and strength.  The market price to date was $15.89 per share.

Takeover Price

MC/NCAV valuation shows that the stock was overvalued. For the reason the ratio exceeded the 1.2 ratios, the average margin of safety was 98 percent average. The average earning per share was $10.41. The SGR was 22.80 percent average. The average annual growth rate was 55 percent. In addition, the return on equity was 30.49 percent average. On the other hand, the payout ratio was 24 percent average.

P/E*EPS

Furthermore, the P/E*EPS valuation indicates that the stock price was undervalued. For the reason, the enterprise value was lesser than the P/E*EPS ratio. On the other hand, the EV/EPS valuation indicates that the stock is undervalued. Because the price represents 15 percent and the earnings were 85 percent.

EV/EBITDA

The EV/EBITDA tells us that it will take 3 years to recover the cost of buying the entire business.  In other words, it will take 3 times of the cash earnings of the company to recover the purchase price.

Conclusion

Overall, it indicates that the stock price of Telecom Argentina was undervalued. The return on equity was 30 percent and the payout ratio was 24 percent. In addition, the earning per share was $10.41 average. Moreover, the company has solid cash which initiated its position and strength. Therefore, I recommend a BUY on the stock of Telecom Argentina S.A. (ADR).

Research and Written by Criselda

Note:

Research Reports can be found under the company tab.