Value-focused investors are constantly seeking stocks priced below their intrinsic value. One such stock that demands attention is Altice USA Inc (ATUS, Financial). Currently priced at $3.21, the stock recorded a gain of 8.45% in a day and a 3-month increase of 9.18%. According to its GF Value, the fair valuation of the stock stands at $12.45.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock, derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
An In-Depth Analysis of Altice USA (ATUS, Financial)
Despite its seemingly attractive valuation, certain risk factors associated with Altice USA should not be overlooked. These risks are primarily reflected through its low Altman Z-score of 0.39. These indicators suggest that Altice USA, despite its apparent undervaluation, might be a potential value trap. This complexity underlines the importance of thorough due diligence in investment decision-making.
Understanding the Altman Z-Score
Before delving into the details, it's essential to understand what the Altman Z-score entails. Invented by New York University Professor Edward I. Altman in 1968, the Z-Score is a financial model that predicts the probability of a company entering bankruptcy within a two-year time frame. The Altman Z-Score combines five different financial ratios, each weighted to create a final score. A score below 1.8 suggests a high likelihood of financial distress, while a score above 3 indicates a low risk.
Company Introduction
Altice USA operates under the Optimum brand name, providing television, internet access, and phone services to approximately 9 million U.S. homes and businesses. Despite its extensive operations and a market cap of $1.5 billion, the company's low Altman Z-score and other financial indicators suggest potential financial distress, making it a potential value trap for investors.
Conclusion
While Altice USA (ATUS, Financial) may seem like an attractive investment opportunity due to its current undervaluation, the company's low Altman Z-score and other financial indicators suggest potential financial distress. Therefore, it's crucial for investors to conduct thorough due diligence before making an investment decision. GuruFocus Premium members can find stocks with high Altman Z-Score using the Walter Schloss Screen .
