Level 3 Communications (NYSE: LVLT) and Telefonica (NYSE:TEF) are both large-cap telecommunications services companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.

Dividends

Telefonica pays an annual dividend of $0.35 per share and has a dividend yield of 3.6%. Level 3 Communications does not pay a dividend. Telefonica pays out 71.4% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares Level 3 Communications and Telefonica’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Level 3 Communications N/A N/A N/A $1.77 30.30
Telefonica $57.59 billion 0.85 $2.62 billion $0.49 19.71

Telefonica has higher revenue and earnings than Level 3 Communications. Telefonica is trading at a lower price-to-earnings ratio than Level 3 Communications, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

98.8% of Level 3 Communications shares are owned by institutional investors. Comparatively, 0.9% of Telefonica shares are owned by institutional investors. 0.5% of Level 3 Communications shares are owned by insiders. Comparatively, 0.0% of Telefonica shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and target prices for Level 3 Communications and Telefonica, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Level 3 Communications 1 3 0 0 1.75
Telefonica 1 3 5 0 2.44

Level 3 Communications presently has a consensus target price of $60.16, suggesting a potential upside of 12.18%. Telefonica has a consensus target price of $11.40, suggesting a potential upside of 18.01%. Given Telefonica’s stronger consensus rating and higher possible upside, analysts clearly believe Telefonica is more favorable than Level 3 Communications.

Risk & Volatility

Level 3 Communications has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, Telefonica has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500.

Profitability

This table compares Level 3 Communications and Telefonica’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Level 3 Communications 7.47% 5.52% 2.45%
Telefonica 4.95% 29.25% 6.62%

Summary

Telefonica beats Level 3 Communications on 8 of the 13 factors compared between the two stocks.

Level 3 Communications Company Profile

Level 3 Communications, Inc. is a provider of a range of integrated communications services. The Company’s operating segments include North America, EMEA and Latin America. The North America includes operations in Atlanta, Georgia; Littleton, Colorado; Miami, Florida; Montreal, Canada; New York, New York; Phoenix, Arizona; Pittsburgh, Pennsylvania; Southfield, Michigan, and Tulsa, Oklahoma. The Europe segment includes operations in Basingstoke, England; Crewe, England; Dublin, Ireland; London, England; Amsterdam, The Netherlands, and Paris, France. The Latin America includes operations in Colombia; Buenos Aires, Argentina; Caracas, Venezuela; Lima, Peru; Quito, Ecuador; Santiago, Chile, and Sao Paulo, Brazil. It offers optical, Internet Protocol, computing and storage technologies. It offers a range of communications services, including Internet Protocol (IP) and data services, transport and fiber services, colocation and data center services, security services and voice services.

Telefonica Company Profile

Telefonica, S.A. is an integrated and diversified telecommunications group operating in Europe and Latin America. The Company’s services and products include Mobile business, Fixed-line telephony business and Digital services. Its segments include Telefonica Spain, Telefonica Brazil, Telefonica Germany, Telefonica United Kingdom and Telefonica Hispanoamerica (formed by the Company’s operators in Argentina, Chile, Peru, Colombia, Mexico, Venezuela and Central America, Ecuador and Uruguay). These segments are engaged in activities relating to wireline, wireless, cable, data, Internet and television (TV) businesses and other digital services in accordance with each location. It offers a range of mobile and related services and products to personal and business customers. It offers traditional fixed telecommunication services, Internet and broadband multimedia services and data and business-solutions services. It offers a range of digital services, such as Internet of Things (IoT).

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