T-Mobile US (TMUS 0.32%) is, by far, the most expensive stock of the three big U.S. wireless carriers, but that doesn't mean investors should avoid the stock.

Based on an analysis of T-Mobile, AT&T's (T 1.65%), and Verizon Communication's (VZ 1.40%) free cash flow expectations for 2023, T-Mobile shares trade at a price-to-free-cash-flow multiple 53% higher than AT&T and 38% higher than Verizon. But with years of free cash flow growth ahead of it, T-Mobile certainly deserves a premium. In fact, despite the premium price, T-Mobile can be a better investment than either AT&T or Verizon.

Booming free cash flow

T-Mobile will improve its free cash flow by about 75% in 2023, putting it more in line with AT&T and Verizon.

While T-Mobile's Sprint acquisition gave T-Mobile significant scale, it's had to spend heavily to integrate Sprint's assets with its own over the past few years. 2022 was the last big spending year for those merger expenses. The big decline in capital expenses this year led T-Mobile's management to forecast free cash flow between $13.1 billion and $13.6 billion in 2023. For reference, T-Mobile generated $7.7 billion in free cash flow in 2022.

That's still well short of what management at AT&T and Verizon said investors can expect. AT&T said investors can expect $16 billion in free cash flow this year. Verizon didn't give a specific range, but some back-of-the-envelope math from Bank of America analyst David Barden, based on the numbers management did provide in its outlook, suggests free cash flow of around $17 billion this year.

Based on their recent market capitalizations, T-Mobile trades for a price-to-forward free cash flow multiple of about 13.2. AT&T and Verizon stocks trade for around 8.6 and 9.6 times, respectively.

Paying a premium for growth

While T-Mobile expects a lot of growth this year, there's still more to come.

For one, management recently reiterated its 2026 outlook for $18 billion in free cash flow. That suggests continued double-digit growth in free cash flow.

Verizon also expects to grow free cash flow by reducing its capital intensity. Likewise, AT&T suggested it would produce about $18 billion in free cash flow per year from 2023 through 2025 at its analyst day last year, but it's already decreased its 2023 outlook from $20 billion to $16 billion since then.

Indeed, T-Mobile could be producing better free cash flow than its debt-laden peers in just a few years. That's especially true if the industry growth trends don't change. T-Mobile continues to lead AT&T and Verizon in postpaid subscriber growth, and it's seeing strong revenue per user growth at the same time. It's also been less aggressive with device promotions, which can have a negative effect on free cash flow. Overall, T-Mobile looks most likely to achieve its long-term outlook versus AT&T or Verizon.

Moreover, T-Mobile has big plans for its growing free cash flow. It's already started on a $60 billion share repurchase program, which will see it gobble up a substantial portion of the outstanding shares. That'll ensure a strong price floor for the stock. That said, T-Mobile doesn't have any immediate plans to begin paying a dividend, a key capital return strategy for both AT&T and Verizon.

With a strong long-term growth outlook, T-Mobile shares look like a great growth investment despite their premium price.