Long-established in the Telecommunication Services industry, AT&T Inc (T, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 0.45%, juxtaposed with a three-month change of -5.39%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of AT&T Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- 1. Financial strength rank: 4/10
- 2. Profitability rank: 7/10
- 3. Growth rank: 2/10
- 4. GF Value rank: 6/10
- 5. Momentum rank: 2/10
Based on the above method, GuruFocus assigned AT&T Inc the GF Score of 64 out of 100, which signals poor future outperformance potential.
AT&T Inc: A Snapshot of Its Business
AT&T Inc, with a market cap of $103.98 billion and sales of $121.44 billion, has been a significant player in the Telecommunication Services industry. The company's operating margin stands at 19.92%. The wireless business contributes about two-thirds of AT&T's revenue following the spinoff of Warner Media. The firm is the third-largest U.S. wireless carrier, connecting 70 million postpaid and 18 million prepaid phone customers. AT&T also has a sizable presence in Mexico, serving 22 million customers, but this business only accounts for 3% of revenue. The firm still holds a 70% equity stake in satellite television provider DirecTV but does not consolidate this business in its financial statements.
Financial Strength Analysis
AT&T Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 3.84 positions it worse than 60.47% of 301 companies in the Telecommunication Services industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just 0.44, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.06 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 7.81, which is above Joel Tillinghast's warning level of 4 and is worse than 89.49% of 314 companies in the Telecommunication Services industry.
Growth Prospects
A lack of significant growth is another area where AT&T Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -13.6 per year over the past three years, which underperforms worse than 88.16% of 380 companies in the Telecommunication Services industry. Over the past five years, AT&T Inc has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -28.2, while the five-year growth rate is at -15.9. Lastly, AT&T Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While AT&T Inc has a rich history and a significant presence in the Telecommunication Services industry, its current financial and growth indicators suggest that it may struggle to maintain its historical performance. Therefore, investors should exercise caution and conduct thorough research before making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
