The stock of Mobile TeleSystems PJSC (NYSE:MBT, 30-year Financials) appears to be 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 $9.47 per share and the market cap of $8.2 billion, Mobile TeleSystems PJSC stock gives every indication of being 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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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company’s financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Mobile TeleSystems PJSC has a cash-to-debt ratio of 0.29, which which ranks 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 $6.7 billion and earnings of $0.908 a share. Its operating margin is 24.70%, which ranks better than 88% 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 one of the most important factors 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. If a company’s business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Mobile TeleSystems PJSC’s 3-year average revenue growth rate is better than 79% of the companies in Telecommunication Services industry. Mobile TeleSystems PJSC’s 3-year average EBITDA growth rate is 12.1%, 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 10.91, while its WACC came in at 10.32. The historical ROIC vs WACC comparison of Mobile TeleSystems PJSC is shown below:
In conclusion, Mobile TeleSystems PJSC (NYSE:MBT, 30-year Financials) stock is believed to be 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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