Is Array Digital Infrastructure (AD) Fairly Priced After Special Dividend And Spectrum Sale News

• If you are wondering whether Array Digital Infrastructure is still fairly priced after its recent run, or if the market is already ahead of itself, this article is for you.
• The share price recently closed at US$50.88, with returns of 3.9% over 7 days, a 12.0% decline over 30 days, a 5.8% decline year to date, and a 30.1% return over 1 year.
• Recent news coverage has focused on Array Digital Infrastructure as part of broader discussions about digital infrastructure and telecom related stocks, giving investors fresh reasons to reassess how it is priced. This context helps explain why sentiment around the stock may have shifted over the short term, even as the longer term picture looks different.
• On our valuation checklist, Array Digital Infrastructure scores 3 out of 6. We will break this down using multiple valuation approaches and then finish with a perspective on another way to think about what the company might be worth.

Find out why Array Digital Infrastructure's 30.1% return over the last year is lagging behind its peers.

Approach 1: Array Digital Infrastructure Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business might be worth by projecting future cash flows and then discounting them back to today’s value using a required return. It is essentially asking what those future $ cash flows are worth in today’s terms.

For Array Digital Infrastructure, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month free cash flow is a loss of $129.5 million. Analysts provide free cash flow estimates out to 2030, with projected free cash flow of $273 million in that year, and Simply Wall St extends those projections further using its own assumptions.

Putting all those projected cash flows together and discounting them back, the DCF model arrives at an estimated intrinsic value of about US$79.89 per share. Compared with the recent share price of US$50.88, this implies the stock is 36.3% undervalued according to this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Array Digital Infrastructure is undervalued by 36.3%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Array Digital Infrastructure.

Approach 2: Array Digital Infrastructure Price vs Earnings

For a profitable company, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings, because it links the share price directly to the business’s current profit rather than revenue or assets.

What counts as a “normal” P/E depends heavily on how quickly earnings are expected to grow and how risky those earnings are. Higher growth and lower perceived risk usually support a higher P/E, while slower growth or higher risk tends to justify a lower one.

Array Digital Infrastructure currently trades on a P/E of 23.52x. That sits above the Wireless Telecom industry average of about 19.64x but below the peer group average of 34.04x. Simply Wall St also estimates a Fair Ratio of 12.43x, which reflects the P/E it would expect given the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics.

This Fair Ratio is more tailored than a simple peer or industry comparison because it folds in company specific factors rather than just lining it up against broad groups. Compared with this Fair Ratio, Array Digital Infrastructure’s current 23.52x P/E looks higher, which points to the shares trading above that indicative level.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Array Digital Infrastructure Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, where you combine your view of Array Digital Infrastructure’s story with specific numbers for future revenue, earnings, margins and a fair value. You can then compare that fair value to the current share price to help assess whether the stock looks attractive, fully priced, or stretched.

A Narrative on Simply Wall St’s Community page links three things together: the business story you believe, the financial forecast that flows from that story, and the fair value those numbers imply. It is all presented in a format that is designed to be quick to read and easy to update when new information such as the AT&T spectrum sale, the US$10.25 special dividend or a CEO change is announced.

The range of Array Digital Infrastructure Narratives already published runs from a lower fair value of about US$59.32 per share to a higher fair value around US$63.00. This allows you to see in one place how different investors interpret the same facts, and then decide which story and set of assumptions you find most reasonable before you make your own call.

Do you think there's more to the story for Array Digital Infrastructure? Head over to our Community to see what others are saying!

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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