Unveiling PLDT (PHI)'s Value: Is It Really Priced Right? A Comprehensive Guide
PLDT Inc (NYSE:PHI) has experienced a daily loss of -2.84%, with a 3-month decrease of -9.2%. Despite these metrics, the company's Earnings Per Share (EPS) stands at 0.99. But does this mean the stock is modestly undervalued? In this article, we delve into the valuation analysis of PLDT (NYSE:PHI), providing you with an in-depth understanding of the company's worth.
A Glimpse into PLDT Inc (NYSE:PHI)
PLDT Inc is a leading telecommunications carrier in the Philippines. The company runs an extensive fixed-line network and holds over half of the market share in the domestic wireless space. With a market cap of $4.40 billion and sales of $3.70 billion, PLDT's share price stands at $20.5, compared to a GF Value of $28.75. This contrast raises the question: Is PLDT undervalued?
Deciphering the GF Value
The GF Value is a unique measure of a stock's intrinsic value, based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair value. If the stock price significantly exceeds the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
PLDT (NYSE:PHI) appears to be modestly undervalued according to our valuation method. Given its current price of $20.5 per share, PLDT's market cap is $4.40 billion. This discrepancy suggests that the stock may be undervalued, and its long-term return is likely to exceed its business growth.
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Assessing PLDT's Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. By examining the cash-to-debt ratio and interest coverage, we can gain insights into a company's financial health. PLDT's cash-to-debt ratio stands at 0.06, which is lower than 83.08% of the companies in the Telecommunication Services industry. This metric indicates that PLDT's financial strength is relatively weak.
PLDT's Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is typically less risky. PLDT has been profitable 10 years over the past decade. Over the past twelve months, it reported a revenue of $3.70 billion and Earnings Per Share (EPS) of $0.99. Its operating margin is 11.37%, ranking better than 55.75% of companies in the Telecommunication Services industry.
Growth is a crucial factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, particularly if the growth is profitable. PLDT's 3-year average annual revenue growth rate is 6.7%, ranking better than 63.49% of companies in the Telecommunication Services industry. Its 3-year average EBITDA growth rate is 15.2%, ranking better than 71.04% of companies in the industry.
Comparing ROIC and WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to assess its profitability. If the ROIC is higher than the WACC, the company is creating value for shareholders. Over the past 12 months, PLDT's ROIC was 2.89, while its WACC came in at 5.38.
Conclusion
In conclusion, PLDT (NYSE:PHI) appears to be modestly undervalued. Despite its weak financial condition, the company exhibits strong profitability. Its growth ranks better than 71.04% of companies in the Telecommunication Services industry. For more information about PLDT stock, check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
