American Tower’s recent performance in focus
American Tower (AMT) stock has drawn attention after a mixed stretch for shareholders, with a modest gain over the past month offset by a decline over the past 3 months and the past year.
Over a 5 year period the total return has also declined, while the 3 year total return remains positive. This contrasting picture is encouraging some investors to reassess how the current share price lines up with American Tower’s fundamentals.
At a share price of US$175.73, American Tower has seen a 30 day share price return of 5.39%. However, the 90 day share price return is down 5.87% and the 1 year total shareholder return is down 10.21%, which points to fading momentum after a recent short term lift.
Spot opportunities beyond American Tower’s recent swings by reviewing a curated group of resilient stocks in our 75 resilient stocks with low risk scores, tailored to investors who want steadier return profiles.Bulls see American Tower’s recent softness as a chance to buy quality communications real estate at a discount. Bears argue the weaker long term returns signal a reset. Which side do the current valuation signals lean toward next?
Price-to-Earnings of 24.1x: Is it justified?
On a P/E of 24.1x, American Tower trades at a level that screens as good value relative to both peers and the wider Specialized REITs industry, based on current earnings.
The P/E multiple compares the share price to earnings per share. For American Tower, this is a common yardstick because the company is profitable, pays a dividend and sits in a sector where investors often anchor on earnings-based metrics.
According to the latest checks, American Tower’s 24.1x P/E is below the North American Specialized REITs industry average of 25.7x and well below the peer average of 44.2x. It is also below an estimated fair P/E of 34.3x, which is the level the ratio could move toward if the market priced the stock in line with that fair multiple.
Explore the SWS fair ratio for American Tower
Result: Price-to-Earnings of 24.1x (UNDERVALUED)
However, American Tower still faces risks if revenue growth of 4.35% or net income growth of 5.13% slow, or if its US$83.2b market cap valuation compresses.
Find out about the key risks to this American Tower narrative.
Another View using the SWS DCF model
The P/E suggests American Tower looks cheap. However, the SWS DCF model points to a fair value of about $292.39 per share, compared with the current $175.73. That implies the stock trades at a large discount. Is the market being cautious, or is this an opportunity being ignored?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out American Tower for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Uncertain about how all this leaves the overall story for American Tower today? Take a closer look at both the upside and the concerns by starting with the 6 key rewards and 1 important warning sign.
Looking for more investment ideas beyond American Tower?
If American Tower has you thinking more carefully about valuation, now is the moment to widen your watchlist using targeted stock ideas from the Simply Wall St screener.
- Target potential value opportunities by checking out 51 high quality undervalued stocks that combine sensible pricing with stronger fundamentals.
- Strengthen your focus on balance sheet quality through a curated list of solid balance sheet and fundamentals (51 results) before the crowd pays closer attention.
- Spot future contenders early by scanning a 20 high quality undiscovered gems that the broader market may not be watching yet.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com