AT & T Executive Summary
Higher profitability margins, consistent efficiency ratios and sound debt position make AT&T a good stock to invest in; however, liquidity needs to improve further
AT&T has been doing very well from profitability perspective. The company's EBITDA and net margins have increased to 37.96% in 2013 and 14.41% in 2013 from 21.78% and 3.30% respectively in 2011. Moreover, the company's return on assets also increased to 6.68% in 2013 from 1.55% in 2011. Focus on growth prospects and accretive acquisitions led to improved operating conditions thereby resulting in higher margins and returns. On one hand, the company focuses on adding new customers and providing them services at faster speed. On the other hand, AT&T also focuses on improving operating …show more content…
The management has also been very successful in managing working capital efficiently. In a highly competitive market, it is difficult to keep altering its receivables and inventory management tactics. Doing so might result in customers seeking other service providers and thereby putting pressure on inventory. Continued focus on increasing revenues and stable working capital management terms led to marginally improved efficiency ratios year on year. Receivables turnover increased to 9.97 in 2013 from 9.58 in 2011, inventory turnover increased to 112.15 from 106.67 in 2011 and asset turnover remained more or less same throughout the review period. AT&T also took benefits of lower interest rates in 2013 and as a result managed to reduce the weighted average debt cost to 4.5% in 2013 from 4.9% in 2012. The result of this benefit is reflected in a better interest coverage ratio. Lower interest rated debts allowed the company to utilize the money towards higher returns generating projects. As a result, the net impact resulted in substantially improved interest coverage ratio. The company's interest coverage ratio …show more content…
Moreover, its return on asset too was higher at 6.68% compared to 6.50% for the industry. EBITDA margin is in line with the industry. Furthermore, the company also has a higher interest coverage ratio in 2013 at 7.74 as compared to industry average of 6.70 on the back of lower exposure to debt. Long-term debt equity ratio was 0.76 in 2013 compared to 1.23 for the industry. This was possible due to recent lower interest rates availed by the company on new debt taken in 2013. AT&T also displayed better than industry working capital management ability. The company's receivable turnover ratio in 2013 was 9.97 compared to industry average of 9.30. Moreover, the inventory ratio was substantially higher than industry at 112.15 compared to 60. The asset turnover ratio came in a tad lower than the industry. Liquidity ratios however are quite lower than the industry average. Current ratio for 2013 was 0.66 compared to industry average of 1.40. Quick ratio too was substantially lower than the industry average. Despite AT&T having such an appealing comparison to the industry, it is available at cheaper valuations compared to the industry average. The price earnings ratio for the company was 10.24 as compared to industry average of 13.60. Despite generating higher returns, profits, cash flows (price/cash flow higher than industry average), and this stock is available at a much cheaper rate.
AT&T has been doing very well from profitability perspective. The company's EBITDA and net margins have increased to 37.96% in 2013 and 14.41% in 2013 from 21.78% and 3.30% respectively in 2011. Moreover, the company's return on assets also increased to 6.68% in 2013 from 1.55% in 2011. Focus on growth prospects and accretive acquisitions led to improved operating conditions thereby resulting in higher margins and returns. On one hand, the company focuses on adding new customers and providing them services at faster speed. On the other hand, AT&T also focuses on improving operating …show more content…
The management has also been very successful in managing working capital efficiently. In a highly competitive market, it is difficult to keep altering its receivables and inventory management tactics. Doing so might result in customers seeking other service providers and thereby putting pressure on inventory. Continued focus on increasing revenues and stable working capital management terms led to marginally improved efficiency ratios year on year. Receivables turnover increased to 9.97 in 2013 from 9.58 in 2011, inventory turnover increased to 112.15 from 106.67 in 2011 and asset turnover remained more or less same throughout the review period. AT&T also took benefits of lower interest rates in 2013 and as a result managed to reduce the weighted average debt cost to 4.5% in 2013 from 4.9% in 2012. The result of this benefit is reflected in a better interest coverage ratio. Lower interest rated debts allowed the company to utilize the money towards higher returns generating projects. As a result, the net impact resulted in substantially improved interest coverage ratio. The company's interest coverage ratio …show more content…
Moreover, its return on asset too was higher at 6.68% compared to 6.50% for the industry. EBITDA margin is in line with the industry. Furthermore, the company also has a higher interest coverage ratio in 2013 at 7.74 as compared to industry average of 6.70 on the back of lower exposure to debt. Long-term debt equity ratio was 0.76 in 2013 compared to 1.23 for the industry. This was possible due to recent lower interest rates availed by the company on new debt taken in 2013. AT&T also displayed better than industry working capital management ability. The company's receivable turnover ratio in 2013 was 9.97 compared to industry average of 9.30. Moreover, the inventory ratio was substantially higher than industry at 112.15 compared to 60. The asset turnover ratio came in a tad lower than the industry. Liquidity ratios however are quite lower than the industry average. Current ratio for 2013 was 0.66 compared to industry average of 1.40. Quick ratio too was substantially lower than the industry average. Despite AT&T having such an appealing comparison to the industry, it is available at cheaper valuations compared to the industry average. The price earnings ratio for the company was 10.24 as compared to industry average of 13.60. Despite generating higher returns, profits, cash flows (price/cash flow higher than industry average), and this stock is available at a much cheaper rate.