AT&T Inc. (T)

Conclusion

AT&T Inc. provides wireless voice and data services, fiber and fixed wireless broadband, and connectivity and managed services for businesses, with a wireless operation in Mexico. On 2026-11-09 the shares closed at 21.80 USD, giving a market capitalisation of 146.9 billion USD and an enterprise value of 314.2 billion USD.

The verdict is undervalued. Four of the five multiples sit below their own ten-year medians: enterprise value to EBITDA is 6.9x against a median of 7.3x, price to free cash flow 8.2x against 9.8x, price to sales 1.14x against 1.38x, and price to book 1.38x against 1.52x. Price to earnings, at 11.2x against a median of 9.9x, is the exception. The discounted cash flow gives 36.93 USD per share at a discount rate of 8.87%. The fair value band runs from 24.77 to 37.15 USD with a midpoint of 30.96 USD, a margin of safety of 42.0%. The reverse DCF implies a yearly decline of 6.6% in growth, while revenue has fallen 6.1% a year over five years and free cash flow per share has fallen 1.3% a year.

The case rests on strong cash generation: free cash flow conversion is 136.5% on a trailing basis, the Piotroski score is 7 of 9, and the share count has fallen 5.5% a year over five years. The weakest numbers are the Altman Z-score of 0.79, net debt to EBITDA of 3.66x, and interest coverage of 3.42x. A further fall in revenue or cash flow, or a rise in debt costs, would challenge the valuation.

Financial health

Financial strength is red, held back by the Altman Z-score of 0.79 and a current ratio of 0.87, while net debt to EBITDA of 3.66x, interest coverage of 3.42x and a quick ratio of 0.31 are also weak. Debt to equity stands at 1.67. The Altman Z-score falls in the distress zone, although that model was designed for manufacturers and AT&T is a telecommunications company. Insolvency risk is low, about 0.3% by the estimate of the Ohlson model over one to two years, based on 2025 annual figures. The company's own debt-heavy balance sheet is the main reason for the caution in this section.

Earnings quality

Earnings quality is green, supported by free cash flow conversion of 136.5% on a trailing basis and 163.7% over five years, and by a Piotroski score of 7 of 9. The accrual ratio is -4.5%, which means cash earnings exceed reported earnings. The Beneish M-score is -2.93, a reading that makes manipulation unlikely. Free cash flow after stock-based compensation is 17.85 billion USD on a trailing basis, but stock-based compensation as a share of revenue is not available because the company does not report it in the data used here. The share count has fallen 5.5% a year over five years, which reflects buybacks. The company beat earnings estimates in six of the last eight quarters, with an average surprise of 4.8%. Analysts raised their current-year estimates by 2.5% over 90 days, and next-year estimates by 1.3%, with 14 upward and 3 downward revisions in the last 30 days.

Profitability

Profitability is green. The operating margin of 17.8% is above its ten-year median of 16.4%, and the net margin of 10.1% is close to its median of 10.2%. The gross margin is 55.5% against a median of 40.5%. ROIC is 8.1% against a WACC of 6.3%, a given difference of 1.8% that is neutral, and the five-year median ROIC is 9.1%. Return on equity is 12.2%, but the DuPont split shows that it depends heavily on leverage: a net margin of 17.4%, an asset turnover of 0.30 and an equity multiplier of 3.80, all for 2025. Operating margin stability is 43.7%. Returns above the cost of capital are thin, so the business earns only a small excess over its funding cost.

Growth

Growth is yellow. Revenue compounded at 1.3% a year over three years, fell 6.1% a year over five years and 1.5% a year over ten years. Revenue grew in five of the last ten years. Earnings per share compounded at 5.5% a year over ten years. Free cash flow per share rose 18.3% a year over three years, but fell 1.3% a year over five years and rose 2.0% a year over ten years. The recent recovery in cash flow per share is therefore not yet visible across a full cycle. Analysts expect next-year earnings per share to grow 8.4%.

Valuation

Valuation is green. Price to earnings stands at 11.2x against a ten-year median of 9.9x, a premium of 13.6%, while enterprise value to EBITDA is 6.9x against 7.3x, a discount of 6.4%. Price to free cash flow is 8.2x against 9.8x, a discount of 15.9%. The DCF gives 36.93 USD per share with a discount rate of 8.87%, a first-stage growth of 0% and terminal growth of 2.5%. The terminal value accounts for 53.1% of that figure. The fair value from historical multiples is 24.98 USD. The fair value band runs from 24.77 to 37.15 USD with a midpoint of 30.96 USD, a margin of safety of 42.0% at a price of 21.80 USD. These values rest on fixed assumptions, including a 5% equity risk premium, and are not price targets. The dividend yield is 5.4%, with a forward yield of 5.1%, and the payout is 44.5% of free cash flow.

Risks

The weakest numbers would hurt the company in different ways. A net debt to EBITDA of 3.66x and interest coverage of 3.42x leave little room if earnings fall or borrowing costs rise, and the current ratio of 0.87 means short-term obligations exceed liquid assets. The Altman Z-score of 0.79 signals financial stress that the model's manufacturing basis may overstate. Five years of falling revenue, at 6.1% a year, show that the core business has been shrinking, and the reverse DCF suggests the market already prices in a continued decline. The stock-based compensation figure is not available. This analysis has no debt maturity schedule and no revenue split by segment, so refinancing risk and the performance of each business line cannot be assessed.