• If you are wondering whether Millicom International Cellular is still attractively priced after its recent run, this article walks through what the current share price might be implying about value.
• The stock closed at US$61.03, with a 7.9% year to date return, a 10.1% return over the past 30 days, and a 153.6% return over the last year, following a very large 3 year gain of 328.6% and a 5 year return of 142.9%.
• These moves have arrived alongside ongoing interest in the company, with investors reacting to news and updates that continue to shape expectations about its prospects and balance sheet strength. Recent coverage has focused on how those expectations compare to the current share price, which is where valuation analysis becomes useful.
• On our checks, Millicom International Cellular scores a 5 out of 6 valuation score. This suggests it screens as undervalued on most of the measures we use. Next we will walk through those methods and, finally, a broader way of thinking about valuation that can add an extra layer of context.

Approach 1: Millicom International Cellular Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting its future cash flows and discounting them back to today’s value using a required return. It is essentially asking what future cash generated by Millicom International Cellular could be worth in today’s dollars.

Millicom International Cellular is currently generating last twelve months free cash flow of about US$794.9 million. Analysts have provided explicit free cash flow estimates up to 2028, including a forecast of US$968 million in that year. Beyond that point, Simply Wall St extends those forecasts out to 2035 using its own extrapolation, with each of those future cash flows discounted back to today.

When those projected cash flows are added up and adjusted for the number of shares, the model suggests an intrinsic value of about US$190.97 per share. Compared with the latest share price of US$61.03, this implies the stock is trading at about a 68.0% discount to that DCF estimate. Based on this method alone, the shares screen as significantly undervalued according to the model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Millicom International Cellular is undervalued by 68.0%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.

Approach 2: Millicom International Cellular Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings. It links the share price directly to the bottom line, which makes it a useful cross check against the cash flow based valuation you saw earlier.

What counts as a “normal” or “fair” P/E depends on what the market expects for growth and how risky those earnings appear. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth or higher risk tends to justify a lower multiple.

Millicom International Cellular currently trades on a P/E of 9.28x. That sits below the Wireless Telecom industry average of about 18.52x and the peer group average of 35.25x. Simply Wall St also calculates a proprietary “Fair Ratio” of 9.77x, which is the P/E it might expect for Millicom International Cellular given factors such as its earnings growth profile, industry, profit margin, market cap and risk characteristics.

The Fair Ratio is designed to be more tailored than a simple industry or peer comparison because it adjusts for company specific traits rather than assuming all telecom stocks should trade on the same multiple. Comparing the current P/E of 9.28x with the Fair Ratio of 9.77x suggests the shares screen as undervalued on this metric, with the actual multiple sitting below the model’s fair level.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1417 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Millicom International Cellular Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply the story you believe about a company, captured in numbers like fair value, future revenue, earnings and profit margins.

A Narrative links what you think is happening in Millicom International Cellular’s business to a financial forecast and then to an estimated fair value, so you can see how your view translates into a price per share.

On Simply Wall St’s Community page, used by millions of investors, Narratives are an easy tool you can use to set your own assumptions, compare your fair value to the current price, and decide whether the gap between the two is large enough to act on.

Narratives also update automatically when new information such as earnings reports or news is added. For Millicom International Cellular, that can mean one investor sets a higher fair value based on more optimistic revenue and margin assumptions, while another sets a lower fair value using more cautious estimates, with both views clearly shown side by side.

Do you think there's more to the story for Millicom International Cellular? 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.