By Eirik Nordgaard
T-Mobile US (NASDAQ:TMUS) is set to report its fourth quarter financial results before the bell on Wednesday (2/17). In January the company provided a preliminary view on subscriber addition for Q4 as well as for the full-year of 2015. The report revealed that T-Mobile's aggressive promotional activities and Un-carrier initiatives helped register record subscriber growth in 2015.
Another key metric investors will be looking at is how many postpaid wireless customers the company gained in the latest quarter. Investors and analysts will also be paying close attention to the companies margins for the quarter as lucrative promotion schemes such as free music and video streaming could have caused margins to shrink. Wall Street is anticipating T-Mobile to announce earnings of 15 cents per share and revenue of $ 8.2 billion for the quarter.
We populated the SprinkleBit analyzer with T-Mobile's main competitors in the wireless telecom industry to project how its financial fundamentals compare to its peers. Let's take a look at how T-Mobile compares against AT&T (NYSE:T), Verizon (NYSE:VZ), Sprint (NYSE:S), and SK Telecom (NYSE:SKM). For this analysis we chose to emphasize on EBITDA in order to evaluate performance.
Wireless companies often experience large capital expenses related to network expansions, so EBITDA helps us determine whether the core operating business, without the effects of capital expenditure and interest payments, is making money. It gives investors a convenient metric for comparing the profitability of companies that have different capital investment patterns. By running the fundamental measures in comparison to the companies mentioned, we received an implied share price of $ 36.31. With the current trading price of $ 35.83 (2/16 @ 10.30am) T-Mobile is undervalued with 1.33%.
We also analyzed the technicals on the daily chart in order to see where the stock price could potentially move to on the release of earnings. With an entry price of $35.83 and a reported loss on earnings, the stock has the potential to fall to $ 33, for a 7.9% loss. With an entry price of $35.83 and a reported beat on earnings, the stock has the potential to rise to $38.50 for a 7.45% gain. The risk/reward ratio for this trade is 0.94.