American Tower (AMT): Reassessing Valuation After a Recent 10% Share Price Pullback

American Tower (AMT) has quietly slipped about 10% over the past 3 months, even as its revenue and earnings keep grinding higher. That disconnect is exactly what has income focused investors paying closer attention.

See our latest analysis for American Tower.

Zooming out, the roughly 10% slide in the 3 month share price return contrasts with its modestly negative 1 year total shareholder return. This suggests sentiment has cooled even as fundamentals and long term tower data center demand stay intact.

If you are reassessing income names in light of this pullback, it could also be a good time to see what else screens well among real estate heavyweights and fast growing stocks with high insider ownership.

With shares now trading at roughly a 30% discount to Wall Street targets despite steady mid single digit revenue and high single digit earnings growth, is American Tower quietly becoming a value buy, or is the market correctly pricing in future demand?

Price-to-Earnings of 27.8x: Is it justified?

On a price-to-earnings ratio of 27.8 times at the last close of $174.29, American Tower screens modestly expensive versus its sector but cheaper than many peers, while also sitting below some estimates of its fair value.

The price-to-earnings multiple compares what investors pay today for each dollar of current earnings. It is a key yardstick for mature, cash-generative REITs like American Tower. Amid steady mid single digit revenue growth and high single digit earnings growth forecasts, this metric reflects what the market is willing to pay for its tower and data center earnings stream.

Relative to the US Specialized REITs industry, AMT trades slightly above the 27.4 times sector average, suggesting investors still ascribe a mild quality premium. Yet compared with a peer average multiple of 39.1 times, that same 27.8 times looks restrained, and versus an estimated fair price-to-earnings ratio of 32.9 times, there is room for the valuation to expand if sentiment improves and the market gravitates toward that higher level.

Explore the SWS fair ratio for American Tower

Result: Price-to-Earnings of 27.8x (UNDERVALUED)

However, investors still face risks from potential slowing data center demand or rising interest rates, which could pressure valuation multiples and dampen total returns.

Find out about the key risks to this American Tower narrative.

Another View on Value

Our DCF model suggests a potentially larger upside, with American Tower trading about 33% below its fair value estimate of $261.46. If cash flows really are that resilient, is the market being too cautious, or are investors rightly discounting future growth and debt risks?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out American Tower for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 918 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own American Tower Narrative

If you see the numbers differently or want to dig into the details yourself, you can build a personalized view in just minutes: Do it your way.

A great starting point for your American Tower research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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