Critical Analysis: Verizon Communications (VZ) and Frontier Communications Corporation (NASDAQ:FTR)
Verizon Communications (NYSE: VZ) and Frontier Communications Corporation (NASDAQ:FTR) are both computer and technology companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, profitabiliy, institutional ownership, risk, earnings, dividends and analyst recommendations.
Valuation & Earnings
This table compares Verizon Communications and Frontier Communications Corporation’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Verizon Communications||$123.64 billion||1.59||$46.55 billion||$3.90||12.36|
|Frontier Communications Corporation||$9.59 billion||0.12||$3.74 billion||($14.42)||-1.05|
Verizon Communications has higher revenue and earnings than Frontier Communications Corporation. Frontier Communications Corporation is trading at a lower price-to-earnings ratio than Verizon Communications, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
62.4% of Verizon Communications shares are held by institutional investors. 0.1% of Verizon Communications shares are held by company insiders. Comparatively, 0.9% of Frontier Communications Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
This table compares Verizon Communications and Frontier Communications Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Frontier Communications Corporation||-9.35%||-1.28%||-0.19%|
This is a breakdown of recent recommendations and price targets for Verizon Communications and Frontier Communications Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Frontier Communications Corporation||2||9||2||0||2.00|
Verizon Communications currently has a consensus price target of $52.87, suggesting a potential upside of 9.64%. Frontier Communications Corporation has a consensus price target of $6.01, suggesting a potential downside of 60.12%. Given Verizon Communications’ stronger consensus rating and higher probable upside, equities analysts clearly believe Verizon Communications is more favorable than Frontier Communications Corporation.
Verizon Communications pays an annual dividend of $2.31 per share and has a dividend yield of 4.8%. Frontier Communications Corporation pays an annual dividend of $2.40 per share and has a dividend yield of 15.9%. Verizon Communications pays out 59.2% of its earnings in the form of a dividend. Frontier Communications Corporation pays out -16.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Frontier Communications Corporation has raised its dividend for 10 consecutive years. Frontier Communications Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk & Volatility
Verizon Communications has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500. Comparatively, Frontier Communications Corporation has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500.
Verizon Communications beats Frontier Communications Corporation on 11 of the 16 factors compared between the two stocks.
Verizon Communications Company Profile
Verizon Communications Inc. is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data and video communications products and services, such as broadband video, data center and cloud services, security and managed network services, and local and long distance voice services. The Company has combined Yahoo! Inc.’s operating assets with its existing AOL Inc. business to create a new subsidiary, Oath Inc., owns a diverse house of more than 50 media and technology brands. The Oath portfolio includes HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, Yahoo Finance and Yahoo Mail.
Frontier Communications Corporation Company Profile
Frontier Communications Corporation (Frontier) is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.
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