The stock of America Movil SAB de CV (NYSE:AMX, 30-year Financials) is believed to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock 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. At its current price of $14.86 per share and the market cap of $49.3 billion, America Movil SAB de CV stock appears to be fairly valued. GF Value for America Movil SAB de CV is shown in the chart below.
Because America Movil SAB de CV is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. America Movil SAB de CV has a cash-to-debt ratio of 0.16, which is worse than 70% of the companies in Telecommunication Services industry. The overall financial strength of America Movil SAB de CV is 4 out of 10, which indicates that the financial strength of America Movil SAB de CV is poor. This is the debt and cash of America Movil SAB de CV over the past years:
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 $48 billion and earnings of $1.119 a share. Its operating margin of 16.48% better than 72% of the companies in Telecommunication Services industry. Overall, GuruFocus ranks America Movil SAB de CV's profitability as fair. This is the revenue and net income of America Movil SAB de CV over the past years:
Growth is probably the most important factor 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. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of America Movil SAB de CV is -0.3%, which ranks in the middle range of the companies in Telecommunication Services industry. The 3-year average EBITDA growth rate is 3.2%, which ranks in the middle range of the companies in Telecommunication Services industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, America Movil SAB de CV's return on invested capital is 8.08, and its cost of capital is 8.14. The historical ROIC vs WACC comparison of America Movil SAB de CV is shown below:
To conclude, the stock of America Movil SAB de CV (NYSE:AMX, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the middle range of the companies in 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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