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AT&T (NYSE:T), Apple (NASDAQ:AAPL), and LG (NYSE:LPL) released financial statements earlier this week. Analysis and valuation of portions of the financial statements suggests AT&T is fairly-valued, LG and Apple are undervalued.

AT&T: Fairly-valued (Sell)

  • Strong competitive position in the US wireless phone industry.
  • Revenue is not strongly correlated with US economic growth.
  • The US wireless phone industry is mature and the growth rate is low to negative; industry barriers to entry are high.
  • Relative to the risk-free rate of interest bearing US Treasury securities, the dividend yield is high and stable.
  • Historically, the telecommunications industry hasn't created significant value for investors.
  • There are few substitutes for wireless telephone service and few competitors in the industry.
  • A significant portion of the employees are union members.
  • Revenue-per-share remained stable at 16.5% to 16.9% of the total during the period examined (revenue-per-share didn't grow).
  • Operating income-per-share declined during the quarters examined.
  • Valuation are near peaks and could decline on macro or micro economic headwinds.
  • Common equity shares are trading above the rising 50-day simple moving average.

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LG: Undervalued (Buy)

  • Consumer electronics is a concentrated industry with weak pricing power.
  • Barriers to entering the industry are high as some products of the industry are in a mature phase and others are experiencing a growth phase.
  • Smart phone sales are growing quickly while high-definition televisions aren't growing as fast.
  • LG sales growth is lagging competitors Apple and Samsung.
  • Technology will play an increasing role in economic and productivity growth.
  • Sales-per-share has been flat (revenue isn't growing), cash flow from operations-per-share declined, price-to-sales is near a trough and price-to-cash flow from operations is near a peak.
  • Given the recent pull-back, downside to valuation is limited.

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No significant revenue growth during the quarters examined.

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Cash flow from operations-per-share declined; the firm is generating less cash flow from operations-per-share of common equity outstanding.

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Apple: Undervalued (Buy)

  • Expanding global sales, particularly in high growth regions.
  • High growth rate risks growth slowdown and valuation ratio contraction.
  • Product supply constrained by production capacity and pace of production.
  • Product quality, innovation and consumer loyalty are enterprise hallmarks.
  • Revenue-per-share and book value-per-share expanded in every quarter.
  • Recent quarterly financial statements report provides scope for further increases in valuation.

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Revenue increased faster than shares outstanding in every quarter. Investors are getting more revenue for their equity stake, almost double Q4 2010 levels.

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Assets have grown more than liabilities and share-holder equity-per-share has more than doubled between Q1 2010 & Q1 2012.

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Disclosure: I am long SPY, QQQ, DIA.

Source: Analysis & Valuation Of AT&T, LG & Apple