American Tower Corp Valuation – March 2019 #AMT

Company Profile (excerpt from Reuters): American Tower Corporation (ATC), incorporated on September 24, 1996, is a holding company. The Company operates as a real estate investment trust (REIT), which owns, operates and develops multitenant communications real estate. Its segments include U.S. property; Asia property; Europe, Middle East and Africa (EMEA) property; Latin America property, and Services. Its primary business is property operations, which include the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities, and tenants in various other industries. Its U.S. property segment includes operations in the United States. Its Asia property segment includes operations in India. The EMEA property segment includes operations in Germany, Ghana, Nigeria, South Africa and Uganda. The Latin America property segment includes operations in Brazil, Chile, Colombia, Costa Rica, Mexico and Peru. Its services segment includes tower-related services in the United States, including site acquisition, zoning and permitting and structural analysis, which primarily supports its site leasing business, including the addition of tenants and equipment on its sites.


Downloadable PDF version of this valuation:

ModernGraham Valuation of AMT – March 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 $83,140,713,988 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.51 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
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 149.29% Pass
6. Moderate PEmg Ratio PEmg < 20 68.93 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 14.20 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 0.51 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.99 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $2.73
MG Growth Estimate 11.31%
MG Value $85.09
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $39.64
MG Value based on 0% Growth $23.24
Market Implied Growth Rate 30.22%
Current Price $188.48
% of Intrinsic Value 221.51%

American Tower Corp 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, 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. 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 $1.56 in 2015 to an estimated $2.73 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 30.22% 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 American Tower Corp revealed the company was trading above its Graham Number of $30.04. The company pays a dividend of $3.15 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 68.94, which was below the industry average of 93.05, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-55.63.

American Tower Corp scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$55.63
Graham Number $30.04
PEmg 68.94
Current Ratio 0.51
PB Ratio 14.20
Current Dividend $3.15
Dividend Yield 1.67%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $2,385,100,000
Total Current Liabilities $4,689,900,000
Long-Term Debt $18,405,100,000
Total Assets $33,010,400,000
Intangible Assets $16,676,200,000
Total Liabilities $27,110,800,000
Shares Outstanding (Diluted Average) 444,436,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.31
Dec2018 $2.77
Dec2017 $2.67
Dec2016 $1.98
Dec2015 $1.41
Dec2014 $2.00
Dec2013 $1.38
Dec2012 $1.60
Dec2011 $0.99
Dec2010 $0.92
Dec2009 $0.61
Dec2008 $0.84
Dec2007 $0.13
Dec2006 $0.06
Dec2005 -$0.60
Dec2004 -$1.10
Dec2003 -$1.56
Dec2002 -$5.95
Dec2001 -$2.35
Dec2000 -$1.15
Dec1999 -$0.34

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.73
Dec2018 $2.35
Dec2017 $2.06
Dec2016 $1.73
Dec2015 $1.56
Dec2014 $1.55
Dec2013 $1.25
Dec2012 $1.12
Dec2011 $0.82
Dec2010 $0.66
Dec2009 $0.42
Dec2008 $0.17
Dec2007 -$0.31
Dec2006 -$0.97
Dec2005 -$1.76
Dec2004 -$2.36
Dec2003 -$2.75

Recommended Reading:

Other ModernGraham posts about the company

American Tower Corp Valuation – June 2018 $AMT
American Tower Corp Valuation – February 2017 $AMT
American Tower Corp Valuation – November 2015 Update $AMT
26 Companies in the Spotlight This Week – 11/22/14
American Tower Corporation Annual Valuation – 2014 $AMT

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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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