Why T-Mobile US Stock Popped on Wednesday

T-Mobile US (NASDAQ: TMUS) stock gained 3.1% through 10:35 a.m. ET after the company reported beats on both top and bottom lines Wednesday morning.

Wall Street analysts had forecast the cellphone operator would earn $2.28 per share on almost $19.6 billion in sales in Q2 2024. In fact, T-Mobile reported a $2.49-per-share profit and sales of nearly $19.8 billion.

T-Mobile Q2 earnings

T-Mobile passed the 100-million-postpaid-customers mark in Q2, adding a net of 1.3 million new customers, a performance management called "best in industry." Of those, 777,000 came for phone service. The rest bought services such as home internet via cellphone tower.

The additions translated into 4% revenue growth, 32% growth in net income (also the best in the industry, as T-Mobile pointed out), and 34% growth in per-share earnings.

Even better, T-Mobile grew its "adjusted" free-cash-flow (FCF) number by 54%, to $4.4 billion in the quarter. (Free cash flow when calculated by the more standard metric of simple operating cash flow minus capital spending was only $3.5 billion. Then again, this number was only $1.6 billion a year ago -- more than a 100% increase. So T-Mobile was actually conservative in claiming only 54% FCF growth! )

Is T-Mobile stock a buy?

What does this mean for investors? Focusing even more closely on the FCF number, T-Mobile's latest guidance shows the company generating about $16.8 billion in adjusted free cash flow through the end of this year, or $13.1 billion in what could be called "unadjusted" FCF.

On a $206 billion market capitalization, this gives T-Mobile stock a price-to-free cash flow ratio of either 12.3 or 15.7 -- depending on how you look at it. Whichever way you look at it, though, that seems a small price to pay for a 1.5%-dividend-paying stock that analysts say will grow earnings at better than 22% annually over the next five years.

T-Mobile stock is a buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy .