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What does T-Mobile US Inc’s (NASDAQ:TMUS) Balance Sheet Tell Us About Its Future?

Andy Nguyen

T-Mobile US Inc (NASDAQ:TMUS), a large-cap worth US$47.88B, comes to mind for investors seeking a strong and reliable stock investment. Market participants who are conscious of risk tend to search for large firms, attracted by the prospect of varied revenue sources and strong returns on capital. However, the key to extending previous success is in the health of the company’s financials. I will provide an overview of T-Mobile US’s financial liquidity and leverage to give you an idea of T-Mobile US’s position to take advantage of potential acquisitions or comfortably endure future downturns. Remember this is a very top-level look that focuses exclusively on financial health, so I recommend a deeper analysis into TMUS here. View our latest analysis for T-Mobile US

Does TMUS produce enough cash relative to debt?

TMUS has sustained its debt level by about US$30.91B over the last 12 months – this includes both the current and long-term debt. At this constant level of debt, TMUS currently has US$1.22B remaining in cash and short-term investments for investing into the business. Additionally, TMUS has produced US$7.96B in operating cash flow in the last twelve months, leading to an operating cash to total debt ratio of 25.76%, meaning that TMUS’s debt is appropriately covered by operating cash. This ratio can also be interpreted as a measure of efficiency as an alternative to return on assets. In TMUS’s case, it is able to generate 0.26x cash from its debt capital.

Can TMUS pay its short-term liabilities?

With current liabilities at US$11.52B, the company is not able to meet these obligations given the level of current assets of US$8.92B, with a current ratio of 0.77x below the prudent level of 3x.

NasdaqGS:TMUS Historical Debt May 9th 18

Can TMUS service its debt comfortably?

T-Mobile US is a highly levered company given that total debt exceeds equity. This is not unusual for large-caps since debt tends to be less expensive than equity because interest payments are tax deductible. Since large-caps are seen as safer than their smaller constituents, they tend to enjoy lower cost of capital. By measuring how many times TMUS’s earnings can cover interest payments, we can evaluate whether its level of debt is sustainable or not. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For TMUS, the ratio of 3.09x suggests that interest is appropriately covered. Large-cap investments like TMUS are often believed to be a safe investment due to their ability to pump out ample earnings multiple times its interest payments.

Next Steps:

TMUS’s high cash coverage means that, although its debt levels are high, the company is able to utilise its borrowings efficiently in order to generate cash flow. But, its lack of liquidity raises questions over current asset management practices for the large-cap. This is only a rough assessment of financial health, and I’m sure TMUS has company-specific issues impacting its capital structure decisions. I recommend you continue to research T-Mobile US to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for TMUS’s future growth? Take a look at our free research report of analyst consensus for TMUS’s outlook.
  2. Valuation: What is TMUS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TMUS is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.