USM Intrinsic Value Calculation – US Cellular’s Increasing Debt Could Pose Risks
December 27, 2023
🌧️Trending News
The mounting debt of United States Cellular ($NYSE:USM), one of the leading mobile service providers in America, is creating a debate about the riskiness of utilizing debt. The company has experienced a rapid increase in debt over the last several years, which has led to questions about its financial stability. In addition, US Cellular has been investing heavily in new infrastructure in order to meet consumer demand for better coverage and services. US Cellular is one of the few mobile service providers that focuses on rural areas, providing coverage in regions otherwise neglected by other networks. It also offers a wide range of plans and services tailored to its customers’ needs, including no-contract plans, unlimited data packages, and prepaid plans. Despite its commitment to providing its customers with quality service, the growing debt of this company could undermine its ability to continue doing so. The risk associated with US Cellular’s increasing debt is twofold.
First, the company may have difficulty servicing their debt due to the high interest rates it has been forced to pay to secure financing. Secondly, if the company fails to meet its debt obligations, it could suffer from a liquidity crisis which would further weaken its financial position. For these reasons, it is important for investors to keep an eye on US Cellular’s financial standing and consider the risks associated with investing in the company. Although US Cellular’s current financial position may be strong, it is wise to be aware of the potential risks that come with investing in a company with a large amount of debt.
Share Price
US Cellular’s increasing debt is a cause for concern, as seen on Wednesday when its stock opened at $41.1 and closed at $40.3, down by 2.1% from previous closing price of 41.2. This drop in stock prices indicates investors are wary of US Cellular’s financial situation, as increasing levels of debt can put pressure on a company’s ability to meet its financial commitments. The company has taken steps to reduce its debt levels, such as refinancing some of its debts into longer-term debt with lower interest rates.
However, that may not be enough to alleviate the risk of rising debt levels. US Cellular’s balance sheet also shows a significant amount of long-term debt which could pose a risk to the company’s future cash flows.
In addition, US Cellular’s customer base has been shrinking in recent years, which could further decrease revenues and put additional strain on the company’s cash flows. The company is also facing increased competition in the market, which could create an even tougher environment for US Cellular. With US Cellular’s increasing debt levels, it is important for investors to be aware of the potential risks associated with the company. Investors should conduct their own due diligence and consult with financial advisors before making any investment decisions. Live Quote…
About the Company
Income Snapshot
Below shows the total revenue, net income and net margin for USM. More…
| Total Revenues | Net Income | Net Margin |
| 3.96k | 12 | 0.8% |
Cash Flow Snapshot
Below shows the cash from operations, investing and financing for USM. More…
| Operations | Investing | Financing |
| 899 | -667 | -336 |
Balance Sheet Snapshot
Below shows the total assets, liabilities and book value per share for USM. More…
| Total Assets | Total Liabilities | Book Value Per Share |
| 10.75k | 6.12k | 54.15 |
Key Ratios Snapshot
Some of the financial key ratios for USM are shown below. More…
| 3Y Rev Growth | 3Y Operating Profit Growth | Operating Margin |
| -0.5% | -14.9% | 6.5% |
| FCF Margin | ROE | ROA |
| 5.5% | 3.5% | 1.5% |
Analysis – USM Intrinsic Value Calculation
At GoodWhale, we have analyzed the fundamentals of UNITED STATES CELLULAR and our proprietary Valuation Line has calculated its fair value to be around $30.7. Currently, UNITED STATES CELLULAR shares are traded at $40.3, which is overvalued by 31.3%. This is a significant gap between fair value and market price, which signals an opportunity for investors to capitalize on it. More…
Peers
In the United States, the telecommunications market is highly competitive, with several large companies vying for market share. United States Cellular Corp is one of the largest providers of wireless service in the country, and it competes directly with other large providers such as Vodafone Group PLC, Verizon Communications Inc, and America Movil SAB de CV. While each company has its own strengths and weaknesses, they all offer similar products and services to consumers. As such, the competition between them is fierce, and each company is always looking for ways to gain an edge over its rivals.
– Vodafone Group PLC ($LSE:VOD)
Vodafone Group PLC is a multinational telecommunications company. It has a market cap of 28.21B as of 2022 and a ROE of 7.2%. The company has operations in Europe, the Middle East, Africa, Asia Pacific, and the United States. It offers mobile and fixed-line voice and data services, broadband, television, and mobile money services.
– Verizon Communications Inc ($NYSE:VZ)
Verizon Communications Inc is an American multinational telecommunications conglomerate and a corporate component of the Dow Jones Industrial Average. The company has a market cap of 156.02B as of 2022 and a Return on Equity of 20.79%. Verizon is one of the largest telecommunications companies in the world, with operations in the United States, Canada, and Europe. The company offers a variety of communications products and services, including wireless voice and data services, broadband internet, and TV services. Verizon also owns and operates a number of subsidiaries, including Verizon Business, which provides communications and data services to businesses, and Verizon Media, which owns and operates a number of popular media brands, including AOL, Yahoo, and HuffPost.
– America Movil SAB de CV ($OTCPK:AMXVF)
America Movil is a Mexican telecommunications company that offers a wide range of services, including fixed-line and mobile telephony, wireless broadband, and pay TV. The company has a market capitalization of $60.16 billion as of 2022 and a return on equity of 31.95%. America Movil is the largest mobile network operator in Latin America and the second largest in the world. The company has over 277 million subscribers in over 30 countries.
Summary
United States Cellular Corporation (USCC) is a telecommunications company offering services to customers primarily in the midwestern and southeastern United States. USCC is a publicly traded company, so investors may want to analyze its performance when considering potential investments. USCC has a relatively high debt-to-equity ratio and a relatively low debt service coverage ratio, both of which can be considered risky for investors. On the other hand, USCC’s return on equity and return on invested capital are both strong, indicating that the company has been successful in utilizing its assets and delivering returns to shareholders.
USCC’s dividend yield also remains competitive, providing additional income for investors. Overall, USCC is an interesting stock to consider for investors who are comfortable with the inherent risks associated with its financial position.
