Numbers

The Numbers

Charter is a $55B-revenue cable broadband operator that throws off ~$21.6B of EBITDA at a 39.5% margin, but spends most of that EBITDA refinancing $96B of debt and re-fibering its plant — leaving free cash flow at just $4.4B. After a 60% stock collapse from FY2024's high, the equity now trades at 5.4× EV/EBITDA and 4.7× earnings, a multiple the market has not assigned to this business in two decades. The single metric that will rerate or derate the stock is broadband subscriber net adds — Q1 2026's loss of 120k internet customers (vs 59k a year ago) is the proximate cause of the de-rating, and the pending Cox transaction is the swing factor on whether the leverage works.

Snapshot

Quality scorecard — is this a well-run business?

Charter has no dividend, runs north of 4× leverage, and has a tangible book value that is deeply negative because of the 2016 Time Warner Cable / Bright House mergers. The case for quality lies not in the balance sheet but in unit economics: stable EBITDA margins near 40%, a predictable subscription revenue base, and a multi-year buyback that has shrunk the share count by 57% since 2017.

Revenue and earnings power — 20-year view

The 2016 Time Warner Cable acquisition is the inflection point — revenue jumped from $9.8B to $29.0B in one year and operating income tripled within 24 months. The bigger story since FY2021 is how flat the top line has gone: revenue has compounded at 1.5% annually for four years while operating income still ground 23% higher on margin expansion alone. That margin lift is now exhausted.

Quarterly trajectory — the trouble is not revenue, it is direction

Revenue has now been pinned in a $13.6B–$13.9B band for 12 straight quarters. EPS keeps drifting higher only because shares keep coming out — and Q1 2026's $9.17 print missed consensus by 8% on weaker mobile margins and 120k internet net losses, the worst quarterly broadband result in years.

Cash generation — are the earnings real?

Operating cash flow runs roughly 2.5× net income — a normal pattern for a depreciating cable plant — but the 5-year FCF/NI ratio is just 0.9× because capex has stepped up from $7B to nearly $12B annually for the rural buildout and DOCSIS 4.0 upgrade. FCF is half what it was at the FY2021 peak and is the line item shareholders care about most.

Capital allocation — what is being done with the cash

Charter has spent $71B repurchasing stock since 2016 — more than three times its current market cap. The 2017–2022 buyback at average prices well above $400 looks expensive in hindsight; the 2023–2024 deceleration to $1–3B coincided with rising rates and capex acceleration; the 2025 step-back-up to $5B is happening at far lower prices but is being reined in ahead of the Cox transaction. The company has never paid a dividend.

Balance sheet — leverage is the constraint, not the strain

Net leverage has hovered in a 4.2–4.6× band since 2018, anchored by Charter's stated 4.0–4.5× target. Maturities are managed — recent issuances of 7.0% 2033 and 7.375% 2036 notes refinanced 5.125%–6.15% paper, and the company extended $13.5B of revolving credit facilities to 2030–2031 in early 2026. Cash interest runs ~$4.9B annually. The risk is not insolvency; it is that every percentage point of refinancing rate costs ~$960M of pre-tax FCF at the current debt stack.

Valuation — now versus its own 20-year history

This is the chart that explains the equity story.

CHTR currently trades at 5.4× EV/EBITDA versus a 5-year mean of 7.5× and a 10-year mean of 9.6×. The last time the multiple compressed below 6× was during the 2008 credit crisis. On every multiple — P/E, EV/EBITDA, P/FCF, P/B — the stock is trading at or near its post-merger lows, with the equity priced as if EBITDA will compress materially from here.

Peer comparison — why Charter is the cheapest

Charter prints the lowest P/E and lowest EV/EBITDA in the group despite the second-highest EBITDA margin (39.5%, behind only Altice's distressed 39.7%). The discount to Comcast — the closest operating analogue — is meaningful: 5.4× vs 5.9× EV/EBITDA, but 4.7× vs 6.5× on earnings. The peer gap exists because Charter is the only operator with broadband subscriber losses still accelerating, has 4.4× leverage versus Comcast's 2.3×, and is in the middle of a transformational Cox merger.

Fair value and scenarios

The valuation toolkit gives a wide range. We anchor on EBITDA reversion and FCF yield, since the P/E is unstable when net income is so heavily geared to interest expense.

The street is split, but the modal view (consensus mean ~$277, ~60% upside from spot) sits between our base and bull cases. Bears anchor on 4–5× EBITDA in perpetuity if broadband losses entrench; bulls require Cox synergies and a return to multi-quarter subscriber stability.

Bottom line — confirm, contradict, watch

The numbers confirm what the popular narrative gets right: cable's terminal-business framing has compressed Charter's multiple to crisis lows, the broadband subscriber base is shrinking, and 4.4× leverage in a 7%-coupon refinancing environment leaves no room for execution mistakes. They contradict the idea that Charter is structurally broken — EBITDA margins are at all-time highs, $4.4B of FCF is genuine cash that will accelerate as the rural buildout taxes capex through 2027, and the share count has compressed 57% in eight years, magnifying every dollar of recovery. The single thing to watch next quarter is broadband net adds: Q1 2026's -120k loss was the proximate cause of the de-rating, and a return to flat-or-better in Q2/Q3 is what flips the consensus from "value trap" to "deep value." A second variable: the Cox merger close — synergy talk is real, but the integration of two leveraged cable assets has historically been where shareholder returns are won or lost.