Compare and Contrast Essay on T-Mobile vs. Sprint Incorporation

Introduction

Both T-Mobile and Sprint offer extra perks in international travel and streaming services. However, following an in-depth and critical analysis of the financial statements of the two companies, T-Mobile outperforms its counterpart in the delivery of attractive perks which fosters customer loyalty while attracting prospective clients. For instance, T-Mobile introduced international travel coverage which enables travelers to use data through the free in-flight Wi-Fi services. The strategy has seen its financials take on an upward trend. Interestingly, T-Mobile experienced an upsurge of customers amounting to 5 million new clients in 2017, closing at a 17% U.S Market share. Sprint, on the other hand, closed at an even less percentage: 12.64% market share (T-Mobile US Inc., 2018).

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T-Mobile Financials

T-Mobile financials depict a sustainable financial standing as the cash flow has been increasing over the last five years improving their efficiency with respect to the management of current assets and current liabilities. From the income statements, it is clear that the company in 2017 exhibited rising inventory turnovers, a clear indication of improved inventory management owing to low inventory relative to the Sprint's high inventory in relation to sales. This data is vital in differentiating net income from cash flow operating activities as indicated in the graphs herein.

Sprint Incorporation Financials

Sprint, on the other hand, lacks financial soundness because of its negative cash flow is drawn from its investing activities (Sprint Corp, 2018). This difference is better established through analysis of the cash flow activities, both operating and financing.

T-Mobile Net Income Trend (5 years)

The growth potential of T-Mobile is apparent in the financial soundness of its trend from the net income for operating activities which was $7.96B compared to $10.6B for Sprint. Analysts employ the Net Cash Flow data categorized to Operation and financing activities to differentiate from net income statements. The Net Investing Cash flow amounted to $11.06B in 2017 compared to Sprint's $6.14B. Net financing activities Cash Flow for Sprint amounted to $210M as opposed to T-Mobiles financing cash flow which was recorded at $1.1B. Notably, though, the Free Cash Flow for T-Mobile increased to $2.73B as opposed to Sprint's figures which reduced to $718M (T-Mobile US Inc., 2018).

It is therefore clear that the growth potential of Sprint is somewhat unassured considering its declining revenues were posting an unattractive chart characterized by a net loss over the last four years. T-Mobile, On the other hand, is somewhat sustainable and financially sound, with a potential for faster and sustainable growth rate which make it a better company for acquisition to gain the competitive advantage and the scale required to effectively and fairly compete with renowned industry leaders (Accounting standards, 2018).

T-Mobile Forecast Earnings Growth over the Next 5Years

On a five year forecast, analysts and investors intending to invest in this company or at least follow it expect its earnings to grow on a 16.27% average annual rate. In 2018 however, analyst forecast the earnings to increase by 39.04% compared to last year's earnings. In 2019, analysts expect to see an annual growth rate of approximately 20.39% over 2018's forecasted earnings (NASDAQ, 2018).

Sprint Forecast Earnings Growth over the Next 5Years

Analysts following Sprint Corporation forecast its growth earnings at a 0% average annual rate. This year, the analysts forecast the corporation's earnings decrease at -98.98% compared to last year's forecasts. However, they forecast a growth of 2484.61% next year over 2018's forecasted earnings (NASDAQ, 2018).

References

Accounting Standards. (2018). Mca.gov.in. Retrieved 24 September 2018, from http://www.mca.gov.in/Ministry/notification/pdf/AS_3.pdf

NASDAQ. (31 Mar. 2018). S Cash Flow. Retrieved from https://www.nasdaq.com/symbol/s/financials?query=cash-flow

NASDAQ. (31 Dec. 2017). TMUS Cash Flow. Retrieved from https://www.nasdaq.com/symbol/tmus/financials?query=cash-flow

Sprint Corp., (2018). Marketwatch.com. Retrieved 24 September 2018, from https://www.marketwatch.com/investing/stock/s/financials/cash-flow

T-Mobile US Inc., (2018). Marketwatch.com. Retrieved 24 September 2018, from https://www.marketwatch.com/investing/stock/tmus/financials/cash-flow