TMUS Stock Study (12-2-25)

Posted by Mark on May 22, 2025 at 06:49 | Last modified: December 2, 2025 13:18

I recently studied T-Mobile US Inc. (TMUS, $206.63).

M* writes:

     > Deutsche Telekom merged its T-Mobile USA unit with prepaid
     > specialist MetroPCS in 2013, and that firm merged with Sprint
     > in 2020, creating the second-largest wireless carrier in the US.
     > T-Mobile now serves 85 million postpaid and 26 million prepaid
     > phone customers, equal to around 30% of the US retail wireless
     > market. The firm entered the fixed-wireless broadband market
     > aggressively in 2021 and now serves 7 million residential and
     > business customers with its wireless network. It also serves
     > nearly 1 million fiber broadband customers through joint ventures
     > with fiber network owners. T-Mobile owns a stake in these firms,
     > which provide wholesale access to their networks. In addition,
     > T-Mobile provides wholesale services to wireless resellers.

Over the past decade, this mega-size ( > $50B revenue/year) company has grown sales and EPS at annualized rates of 12.4% and 17.0%, respectively. Lines are somewhat up, straight, and parallel except for sales dips in ’22 and ’23 and EPS declines in ’18, ’20, and ’22. Five- (10-) year R^2 is 0.73 (0.43) and Value Line (VL) gives an Earnings Predictability score of 75.

Over the past decade, PTPM trails peer and industry averages while increasing from 3.1% (’15) to 18.1% (’24) with last-5-year mean of 9.1%. ROE also trails peer and industry averages while ranging from 3.6% in ’22 to 22.0% in ’17 with a last-5-year mean of 8.5%. Debt-to-Capital is less than peer and industry averages despite increasing from 58.5% in ’15 to 64.9% in ’24 with a last-5-year mean of 62.7%.

Quick Ratio is 0.53 and Interest Coverage 5.3 per M* who assigns “Narrow” Economic Moat, gives “Exemplary” rating for Capital Allocation and a B grade for Financial Health (per BI website). VL gives a Financial Strength rating of A.

With regard to sales growth:

• YF gives YOY ACE 8.3% and 7.2% for ’25 and ’26, respectively (based on 26 analysts).
• Zacks gives YOY ACE 7.7% and 6.6% for ’25 and ’26, respectively (7 analysts).
• VL projects 6.3% annualized growth from ’24-’29.
• CFRA projects YOY 6.5% and 5.9% per year for ’25 and ’24-’26, respectively.
• M* gives 2-year ACE of 8.0% growth/year and projects long-term growth of 6.0% (Equity Report).

My 5.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 16.6% and 16.8% per year for ’24-’26 and ’24-’27, respectively (based on 31 analysts).
• Nasdaq.com gives ACE 16.6% and 15.2% per year for ’25-’27 and ’25-’28 [ 8 / 6 / 1 analyst(s) for ’25 / ’27 / ’28].
• Seeking Alpha projects 4-year annualized growth of 15.1%.
• Argus projects 5-year annualized growth of 10.0% (July report).
• Finviz gives 5-year annualized growth of 15.1% (11).
• LSEG estimates LTG at 15.4%.
• YF gives YOY ACE of 8.4% and 15.8% for ’25 and ’26, respectively (25).
• Zacks gives YOY ACE of 4.6% and 14.0% for ’25 and ’26, and 5-year annualized growth of 15.2% (7).
• VL projects 15.8% annualized growth from ’24-’29.
• CFRA gives ACE of 12.5% YOY and 15.2% per year for ’25 and ’24-’26 along with 3-year CAGR of 16.0%.
• M* gives long-term ACE equal to Equity Report of 21.8% (puzzling).

My 9.0% forecast is below the long-term estimate range (mean of seven not including M* duplicate: 15.5%). Initial value is ’24 EPS of $9.66/share instead of 2025 Q3 $10.39 (TTM).

My Forecast High P/E is 21.0. Over the past 10 years, high P/E ranges from 13.2 in ’17 to 74.9 in ’22 with a last-5-year mean of 48.6 and a last-5-year-mean average P/E of 39.8. I am less than all but ’17.

My Forecast Low P/E is 15.0. Over the past 10 years, low P/E ranges from 10.5 in ’17 to 49.3 in ’22 with a last-5-year mean of 31.0. I am forecasting below all but ’17.

My Low Stock Price Forecast (LSPF) of $144.90 is default based on initial value given above. This is 29.9% less than the previous close and 27.3% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 27.3% in ’20 to 60.8% in ’19 with a last-5-year mean of 45.6%. I am forecasting below the range at 27.0%.

These inputs land TMUS in the HOLD zone with a U/D ratio of 1.0. Total Annualized Return (TAR) is 9.0%.

Since 2023 inception, Payout Ratio (PR) increases from 9.4% to 29.3%. I am forecasting below the range at 9.0%.

PAR (using Forecast Average—not High—P/E) of 5.8% is less than I seek for a mega-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 39 studies in the past 90 days (my study and 18 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 6.6%, 15.5%, 24.0, 17.2, and 19.3%, respectively. I am lower across the board. VL (M*) projects a future average annual P/E of 21.0 (8.0, which is a bit of a head-scratcher) that is greater than MS (20.7) and greater than mine (18.0).

MS high / low EPS are $21.18 / $10.24 versus my $14.86 / $9.66 (per share). My high EPS is less due mainly to a lower growth rate. VL’s (M*) high EPS of $20.15 ($25.91) is in the middle (soars above both).

MS LSPF of $175.00 implies a Forecast Low P/E of 17.1: almost equal to the above-stated 17.2. My LSPF is 17.2% less.

MOS is robust in the study because my inputs are near or below historical/analyst/MS averages/ranges (head-scratcher aside). Also backing this assessment are MS TAR exceeding mine by 4.8% per year and my significantly lower LSPF.

With regard to valuation, PEG is 1.3 and 2.0 per Zacks and my projected P/E: fairly valued (M* indicates undervalued at 0.63). Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.50. M* has stock undervalued by 21%.

Per U/D, TMUS is a BUY under $153/share. BI TAR criterion would be met [312.1 / ((13.87 / 100 ) +1 ) ^ 5] ~ $158.00 given a forecast high price ~$312.

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).