American Tower Corp. is scored 59 for moat and 38 for management. The management score rests on a return on invested capital of 6.7% and a gross margin of 73.7% — figures that describe capital earning less than it costs to employ. The balance sheet carries debt at 12.31x equity, which magnifies both the returns above and the risk beneath them. The moderate moat and weak management are not the same judgement, and the gap between them is where the argument about this business sits.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 5.8% a year, below the 6.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 11.5x. That produces an intrinsic value of $36.34, a 10-CAP price of $96.54 and a payback time price of $100.23, with the value zone set at the highest of the three, $100.23. Today's price of $161.06 is 61% above it.
The price is above the value zone and the business scores 59 for moat and 38 for management. Neither test argues for paying up here.
| Price | $161.06 |
| Market cap | $75.0B |
| P/E ratio | 22.2x |
| Return on invested capital | 6.7% |
| Gross margin | 73.7% |
| Debt to equity | 12.31x |
| Free cash flow yield | 4.6% |
| Growth rate used | 5.8% |
| Growth rate measured | 6.0% |
| Exit multiple assumed | 11.5x |
| Company | Moat | Buy price |
| Digital Realty (DLR) | 53 | $62.46 |
| Equinix Inc. (EQIX) | 62 | $260.54 |
| Iron Mountain (IRM) | 33 | $10.28 |
| SBA Communications (SBAC) | 45 | $111.78 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of American Tower Corp. rather than accepting ours.