SBA Communications Corp Valuation – January 2019 $SBAC

Company Profile (excerpt from Reuters): SBA Communications Corporation, incorporated on December 23, 1996, is an independent owner and operator of wireless communications tower structures, rooftops and other structures that support antennas used for wireless communications. The Company’s operating segments include site leasing and site development. The site leasing business includes segments, domestic site leasing and international site leasing. The Company’s primary business line is its site leasing business. In its site leasing business, the Company leases antenna space to wireless service providers on towers that it owns or operates, and manages rooftop and tower sites for property owners under various contractual arrangements. The Company owns approximately 25,460 towers. The Company also manages or leases approximately 5,500 actual or potential towers. The Company’s other business line is its site development business, through which it assists wireless service providers in developing and maintaining their own wireless service networks. The Company’s principal operations are in the United States and its territories. In addition, it owns and operates towers in Canada, Central America and South America.

Downloadable PDF version of this valuation:

ModernGraham Valuation of SBAC – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,326,242,846 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -138.56% Fail
6. Moderate PEmg Ratio PEmg < 20 895.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -6.04 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 156.23 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $0.18
MG Growth Estimate 15.00%
MG Value $7.03
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $2.65
MG Value based on 0% Growth $1.55
Market Implied Growth Rate 443.37%
Current Price $163.53
% of Intrinsic Value 2325.29%

SBA Communications Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.75 in 2014 to an estimated $0.18 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 443.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into SBA Communications Corporation revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 895.24, which was above the industry average of 25.67. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-86.39.

SBA Communications Corporation scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$86.39
Graham Number $0.00
PEmg 895.24
Current Ratio 1.23
PB Ratio -6.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $327,663,000
Total Current Liabilities $265,512,000
Long-Term Debt $9,710,145,000
Total Assets $7,213,823,000
Intangible Assets $3,387,955,000
Total Liabilities $10,358,906,000
Shares Outstanding (Diluted Average) 116,114,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.08
Dec2017 $0.86
Dec2016 $0.61
Dec2015 -$1.37
Dec2014 -$0.19
Dec2013 -$0.44
Dec2012 -$1.51
Dec2011 -$1.14
Dec2010 -$1.68
Dec2009 -$1.20
Dec2008 -$0.61
Dec2007 -$0.74
Dec2006 -$1.36
Dec2005 -$1.28
Dec2004 -$2.52
Dec2003 -$3.36
Dec2002 -$5.29
Dec2001 -$2.99
Dec2000 -$0.70
Dec1999 -$1.77
Dec1998 -$2.64

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.18
Dec2017 $0.12
Dec2016 -$0.36
Dec2015 -$0.87
Dec2014 -$0.75
Dec2013 -$1.08
Dec2012 -$1.34
Dec2011 -$1.20
Dec2010 -$1.19
Dec2009 -$0.98
Dec2008 -$1.01
Dec2007 -$1.43
Dec2006 -$2.10
Dec2005 -$2.68
Dec2004 -$3.24
Dec2003 -$3.34
Dec2002 -$3.11

Recommended Reading:

Other ModernGraham posts about the company

SBA Communications Corp Valuation – Initial Coverage $SBAC

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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