Critical Comparison: AT&T (NYSE:T) and T-Mobile US (NASDAQ:TMUS)

T-Mobile US (NASDAQ:TMUS) and AT&T (NYSE:T) are both large-cap computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, valuation, institutional ownership, profitability and analyst recommendations.

Insider and Institutional Ownership

42.5% of T-Mobile US shares are held by institutional investors. Comparatively, 57.1% of AT&T shares are held by institutional investors. 0.4% of T-Mobile US shares are held by insiders. Comparatively, 0.1% of AT&T shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and target prices for T-Mobile US and AT&T, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
T-Mobile US	1	12	9	3	2.56
AT&T	1	6	17	1	2.72

T-Mobile US currently has a consensus price target of $256.31, suggesting a potential upside of 6.10%. AT&T has a consensus price target of $29.66, suggesting a potential upside of 7.85%. Given AT&T’s stronger consensus rating and higher probable upside, analysts plainly believe AT&T is more favorable than T-Mobile US.

Profitability

This table compares T-Mobile US and AT&T’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
T-Mobile US	14.53%	19.68%	5.78%
AT&T	10.29%	13.36%	3.99%

Earnings and Valuation

This table compares T-Mobile US and AT&T”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
T-Mobile US	$81.40 billion	3.34	$11.34 billion	$10.60	22.79
AT&T	$122.34 billion	1.61	$10.95 billion	$1.76	15.63

T-Mobile US has higher earnings, but lower revenue than AT&T. AT&T is trading at a lower price-to-earnings ratio than T-Mobile US, indicating that it is currently the more affordable of the two stocks.

Dividends

T-Mobile US pays an annual dividend of $3.52 per share and has a dividend yield of 1.5%. AT&T pays an annual dividend of $1.11 per share and has a dividend yield of 4.0%. T-Mobile US pays out 33.2% of its earnings in the form of a dividend. AT&T pays out 63.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Volatility and Risk

T-Mobile US has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500. Comparatively, AT&T has a beta of 0.42, meaning that its stock price is 58% less volatile than the S&P 500.

Summary

T-Mobile US beats AT&T on 11 of the 17 factors compared between the two stocks.

About T-Mobile US

T-Mobile US, Inc., together with its subsidiaries, provides mobile communications services in the United States, Puerto Rico, and the United States Virgin Islands. The company offers voice, messaging, and data services to customers in the postpaid, prepaid, and wholesale and other services. It also provides wireless devices, including smartphones, wearables, tablets, home broadband routers, and other mobile communication devices, as well as wireless devices and accessories; financing through equipment installment plans; reinsurance for device insurance policies and extended warranty contracts; leasing through JUMP! On Demand; and High Speed Internet services. In addition, the company offers services, devices, and accessories under the T-Mobile and Metro by T-Mobile brands through its owned and operated retail stores, T-Mobile app and customer care channels, and its websites. It also sells its devices to dealers and other third-party distributors for resale through independent third-party retail outlets and various third-party websites. The company was founded in 1994 and is headquartered in Bellevue, Washington.

About AT&T

AT&T, Inc. is a holding company, which engages in the provision of telecommunications and technology services. It operates through the Communications and Latin America segments. The Communications segment offers wireless, wireline telecom, and broadband services to businesses and consumers located in the US and businesses globally. The Latin America segment provides wireless services and equipment in Mexico. The company was founded in 1983 and is headquartered in Dallas, TX.