Unveiling America Movil SAB de CV (AMX)'s Value: Is It Really Priced Right? A Comprehensive Guide
On October 18, 2023, America Movil SAB de CV (NYSE:AMX) experienced a day's loss of -6.13% with a 3-month loss of -23.81%. Despite these figures, the company's Earnings Per Share (EPS) stood at 1.49. This raises the question: is the stock modestly undervalued? In this article, we delve into an in-depth valuation analysis of America Movil SAB de CV (NYSE:AMX) to answer this question.
Company Introduction
America Movil SAB de CV (NYSE:AMX), the largest telecom carrier in Latin America, serves about 300 million wireless customers across the region. It also provides fixed-line phone, internet access, and television services in most of the countries it serves. With Mexico as its largest market, providing about 35% of service revenue, the company dominates the Mexican wireless market with more than 60% customer share. The company's stock price currently stands at $16.09, while the GF Value, an estimation of fair value, is at $20.45. This comparison paves the way for an in-depth exploration of the company's value.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
GuruFocus adjustment factor based on the company's past returns and growth.
Future estimates of the business performance.
We believe the GF Value Line is the fair value that the stock should be traded at. The stock price will most likely fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
The stock of America Movil SAB de CV is believed to be modestly undervalued based on GuruFocus' valuation method. GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. At its current price of $16.09 per share, America Movil SAB de CV has a market cap of $50.50 billion and the stock is believed to be modestly undervalued.
Because America Movil SAB de CV is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. America Movil SAB de CV has a cash-to-debt ratio of 0.2, which ranks worse than 60.88% of 386 companies in the Telecommunication Services industry. Based on this, GuruFocus ranks America Movil SAB de CV's financial strength as 5 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. America Movil SAB de CV has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $44.10 billion and Earnings Per Share (EPS) of $1.49. Its operating margin of 21.22% is better than 79.84% of 387 companies in the Telecommunication Services industry. Overall, GuruFocus ranks America Movil SAB de CV's profitability as fair.
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. America Movil SAB de CV's 3-year average revenue growth rate is worse than 62.13% of 375 companies in the Telecommunication Services industry. America Movil SAB de CV's 3-year average EBITDA growth rate is 4.1%, which ranks better than 50.45% of 331 companies in the Telecommunication Services industry.
ROIC vs WACC
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, America Movil SAB de CV's ROIC is 7.45 while its WACC came in at 10.88.
Conclusion
In summary, the stock of America Movil SAB de CV (NYSE:AMX) is believed to be modestly undervalued. The company's financial condition is fair and its profitability is fair. Its growth ranks better than 50.45% of 331 companies in the Telecommunication Services industry. To learn more about America Movil SAB de CV stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
