The stock of Mobile TeleSystems PJSC (NYSE:MBT, 30-year Financials) gives every indication of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $8.28 per share and the market cap of $7.3 billion, Mobile TeleSystems PJSC stock is believed to be fairly valued. GF Value for Mobile TeleSystems PJSC is shown in the chart below.
Because Mobile TeleSystems PJSC is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 9.5% over the past five years.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Mobile TeleSystems PJSC has a cash-to-debt ratio of 0.32, which is in the middle range of the companies in Telecommunication Services industry. The overall financial strength of Mobile TeleSystems PJSC is 4 out of 10, which indicates that the financial strength of Mobile TeleSystems PJSC is poor. This is the debt and cash of Mobile TeleSystems PJSC over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Mobile TeleSystems PJSC has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $8.1 billion and earnings of $1.122 a share. Its operating margin is 21.76%, which ranks better than 83% of the companies in Telecommunication Services industry. Overall, the profitability of Mobile TeleSystems PJSC is ranked 8 out of 10, which indicates strong profitability. This is the revenue and net income of Mobile TeleSystems PJSC over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Mobile TeleSystems PJSC is 9.5%, which ranks better than 78% of the companies in Telecommunication Services industry. The 3-year average EBITDA growth rate is 12.3%, which ranks in the middle range of the companies in Telecommunication Services industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Mobile TeleSystems PJSC's ROIC was 9.45, while its WACC came in at 10.28. The historical ROIC vs WACC comparison of Mobile TeleSystems PJSC is shown below:
To conclude, The stock of Mobile TeleSystems PJSC (NYSE:MBT, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is poor and its profitability is strong. Its growth ranks in the middle range of the companies in Telecommunication Services industry. To learn more about Mobile TeleSystems PJSC stock, you can check out its 30-year Financials here.
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