Exploring American Tower (AMT) Valuation as Share Price Momentum Slows

American Tower (AMT) shares have shown some swings lately, leaving investors curious about what’s next for this real estate giant. With a year-to-date gain followed by a recent pullback, there are questions around value and longer-term potential.

See our latest analysis for American Tower.

American Tower’s shares may have weathered some turbulence lately, but what really stands out is how momentum has faded compared to earlier this year. After a decent start, a challenging 90 days left the stock with a 1.28% share price return year-to-date, while the 1-year total shareholder return is still in the red at -2.84%. Shifting sentiment suggests investors are weighing growth potential against persistent risks, a theme reflected in its longer-term total returns as well.

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With shares now trading about 30 percent below analysts’ intrinsic value estimates, the real question is whether American Tower’s current price reflects future growth or if there is still an upside that the market may be overlooking.

Price-to-Earnings of 29.2x: Is it justified?

American Tower is currently trading at a price-to-earnings (P/E) ratio of 29.2x, positioning it as good value compared to peers. With the last close at $183.35, this number immediately stands out for investors seeking benchmarks for valuation.

The P/E ratio measures how much investors are paying for each dollar of earnings and is a crucial gauge, especially for real estate investment trusts (REITs) like American Tower. A lower P/E relative to peers suggests the market is not pricing in as much growth or quality, potentially highlighting an opportunity.

At 29.2x, American Tower’s multiple is significantly lower than the peer average of 42.4x. This suggests its valuation is relatively attractive. In addition, the estimated fair P/E ratio for American Tower is 34.7x, indicating room for the market to move higher and close the gap.

Explore the SWS fair ratio for American Tower

Result: Price-to-Earnings of 29.2x (UNDERVALUED)

However, persistent headwinds such as softer three-year and five-year returns and ongoing market volatility could weigh on American Tower’s near-term outlook.

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

Another View: SWS DCF Model Shows Even More Upside

While American Tower appears attractive on earnings multiples, our DCF model offers a stronger perspective. According to this method, shares are valued at $183.35, which is significantly below the estimated fair value of $262.51. This indicates that the stock may be undervalued by a wide margin according to cash flow analysis. With such divergence, does this mean the market is missing something big?

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 865 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 reach your own conclusions or dig deeper into the numbers, you can easily shape your own view in just a few minutes with 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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