American Tower

Methodology

This method has limited applicability for American Tower as a cell tower REIT, since REITs must distribute most income and reported EPS doesn't reflect the cash-generating power of tower assets. The company's revenue comes from long-term tenant leases on telecommunications towers with high incrementa margins as tenants are added. Investors should use AFFO (Adjusted Funds From Operations) or dividend-focused models rather than traditional earnings metrics for tower REITs.

Methodology

Traditional PEG analysis is problematic for American Tower because GAAP earnings include significant non-cash depreciation charges that don't reflect economic reality of towers appreciating over time. If using PEG, substitute AFFO growth for EPS growth to get meaningful results. Even then, tower REITs are better valued on yield, AFFO multiples, and tower cash flow fundamentals rather than earnings-based growth metrics.

Methodology

American Tower's dividend yield (typically 2.0-3.5%) is important but represents only part of the total return story for a growth-oriented tower REIT. The company balances dividend payments with reinvestment in new tower construction and acquisitions to drive AFFO growth. PEGY provides more context than PEG alone, though for tower REITs, AFFO yield and growth combined with leverage levels offer better valuation insight than earnings-based approaches.