A Look at American Tower’s (AMT) Valuation After Strong Revenue Growth and Cash Flow Concerns

American Tower (AMT) released its latest earnings on October 28, and reported revenue growth that surpassed market expectations. However, despite the stronger topline, the stock dropped 4% as cash flow measures trended lower year-over-year.

See our latest analysis for American Tower.

After a year marked by ups and downs, American Tower’s share price has essentially been treading water. It is up just 0.1% year-to-date, while the one-year total shareholder return sits at a disappointing -10.3%. Recent volatility likely reflects growing scrutiny on cash flow trends, even as revenue growth remains strong and deal momentum continues. Investors seem to be weighing the long-term growth story against short-term concerns about cash generation.

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With strong revenue gains, significant cash flows, and a sizable discount to analyst targets, the big question remains: Is American Tower undervalued at these levels, or is the market already pricing in future growth?

Price-to-Earnings of 28.9x: Is it justified?

At a current price-to-earnings (P/E) ratio of 28.9x, American Tower trades almost exactly in line with the broader US Specialized REITs industry average (28.7x), but well below its group of peers with an average P/E of 40.5x. The last close price was $181.27. This multiple suggests the market has tempered its growth expectations compared to peers.

The P/E ratio measures how much investors are willing to pay per dollar of earnings, reflecting both current profitability and future growth expectations. For a leading tower REIT with a global footprint and steady earnings, P/E acts as a key valuation benchmark that helps investors compare American Tower to similar businesses and alternatives in the sector.

The fact that American Tower’s P/E is lower than the peer group average could imply the stock is being underappreciated by the market, or that investors are factoring in risks specific to the company or sector. However, the stock still trades at a discount to the estimated fair P/E of 34.6x. This is a level that the market could recognize if growth drivers play out as anticipated.

Explore the SWS fair ratio for American Tower

Result: Price-to-Earnings of 28.9x (UNDERVALUED)

However, persistent cash flow pressures and any slowdown in annual revenue growth could quickly alter the outlook and challenge the case for undervaluation.

Find out about the key risks to this American Tower narrative.

Another View: SWS DCF Model Suggests Further Upside

While the price-to-earnings ratio points to possible undervaluation, our DCF model provides an even stronger perspective. It estimates American Tower's fair value at $262.47 per share, which is 30.9% higher than the current price. Could the market be missing a bigger long-term opportunity here?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out American Tower for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 914 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own American Tower Narrative

If you want to dig into the numbers yourself or take your own view, you can easily shape your own narrative in just minutes. Do it your way

A great starting point for your American Tower research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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