American Movil (AMX) is an interesting case as it is one of the leading telecom companies in the emerging markets. However, growth for the company is slowing. It is only expected to generate a revenue increase of 3.3% in 2012 and 6.6% in 2013. A far cry from the 12.3% recorded in 4Q11. That of course has brought down the valuations and the stock is now undervalued on a trailing valuation basis as well on a forward basis. Analysts suggest that the stock is about fairly valued. With growth slowing for the company and other telecom companies projected to post better growth rates, it makes sense to look elsewhere for exposure to emerging markets' telecom services. Below is a closer look at the valuation metrics.
Valuation: American Movil's trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. American Movil's current P/B ratio is 4.1 and it has averaged 6.3 over the past 5 years with a high of 9.5 and low of 3.8. American Movil's current P/S ratio is 2 and it has averaged 3 over the past 5 years with a high of 4.6 and low of 1.6. American Movil's current P/E ratio is 14.3 and it has averaged 15.9 over the past 5 years with a high of 24 and low of 8.6.
Price Target: The consensus price target for the analysts who follow American Movil is $27. That is upside of 15% from today's stock price of $23.94 and suggests that the stock is fairly valued at these levels. This also suggests that the stock has limited upside and should be avoided at its current stock price.
Forward Valuation: American Movil is currently trading at about $24 a share with analysts expecting EPS of $2.02 next year, an earnings increase of 2% y/y, for a forward P/E ratio of 11.9. Taking a look at the company's publically traded comparisons will give us a better idea of the stock's relative valuation. Telefonica (TEF) is currently trading at about $17 a share with analysts expecting EPS of $2.22 next year, an earnings increase of 24% y/y, for a forward P/E ratio of 7.7.
Telefonica Brasil (VIV) is currently trading at about $31 a share with analysts expecting EPS of $3.05 next year, an earnings increase of 22% y/y, for a forward P/E ratio of 10.1. China Telecom (CHA) is currently trading at about $57 a share with analysts expecting EPS of $2.18 next year, an earnings decline of 4% y/y, for a forward P/E ratio of 26.2. The mean forward P/E of American Movil's competitors is 14.7 which suggests that American Movil is undervalued relative to its publically traded competitors.
Earnings Estimates: American Movil has beat EPS estimates 0 times in the past 4 quarters. The company's EPS figures have come in between -16 cents and 0 cents from consensus estimates or about -34% to 0% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside/downside from earnings surprises.
Price Action: American Movil is down 10.5% over the past year, underperforming the S&P 500, which is up 12.6%. Looking at the technicals, the stock is currently above its 50 day moving average, which sits at $23.52 and above its 200 day moving average, which sits at $23.88.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.