Telefonica (NYSE:TEF) and Spirent Communications (OTCMKTS:SPMYY) are both utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, analyst recommendations, risk, institutional ownership and dividends.

Institutional and Insider Ownership

1.0% of Telefonica shares are held by institutional investors. 0.0% of Telefonica shares are held by company insiders. Comparatively, 1.0% of Spirent Communications 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.

Profitability

This table compares Telefonica and Spirent Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telefonica 7.35% 16.89% 3.82%
Spirent Communications N/A N/A N/A

Risk and Volatility

Telefonica has a beta of 0.68, meaning that its share price is 32% less volatile than the S&P 500. Comparatively, Spirent Communications has a beta of 0.67, meaning that its share price is 33% less volatile than the S&P 500.

Earnings and Valuation

This table compares Telefonica and Spirent Communications’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telefonica $57.51 billion 0.74 $3.93 billion $0.95 8.65
Spirent Communications $476.90 million 2.58 $55.80 million $0.43 18.70

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

Dividends

Telefonica pays an annual dividend of $0.35 per share and has a dividend yield of 4.3%. Spirent Communications pays an annual dividend of $0.19 per share and has a dividend yield of 2.4%. Telefonica pays out 36.8% of its earnings in the form of a dividend. Spirent Communications pays out 44.2% 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. Telefonica is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of recent ratings for Telefonica and Spirent Communications, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telefonica 2 3 5 0 2.30
Spirent Communications 0 0 0 0 N/A

Summary

Telefonica beats Spirent Communications on 11 of the 14 factors compared between the two stocks.

About Telefonica

Telefónica, S.A. provides mobile and fixed communication services primarily in Europe and Latin America. The company's mobile and related services and products comprise mobile voice, value added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary and business oriented value-added; video telephony; intelligent network; and telephony information services. The company also leases and sells handset equipment, as well as provides Internet and broadband multimedia services comprising Internet service provider; portal and network; retail and wholesale broadband access; narrowband switched access to Internet; high-speed Internet services through fiber to the home; and voice over Internet protocol services. In addition, it offers data and business-solutions services that include leased lines; virtual private network; fiber optics; hosting and application; outsourcing and consultancy; desktop; and system integration and professional services. Further, the company offers wholesale services for telecommunication operators, including domestic interconnection; international wholesale; leased lines for other operators' network deployment; and local loop leasing under the unbundled local loop regulation framework, as well as bit stream services, wholesale line rental accesses, and leased ducts for other operators' fiber deployment. Additionally, it provides Internet protocol television (TV), over-the-top network TV, cable and satellite TV, and pay TV services; M2M connectivity platforms; financial and other payment, security, cloud computing, advertising, big data, and digital telco experience services; and Aura and Movistar Home. The company was founded in 1924 and is headquartered in Madrid, Spain.

About Spirent Communications

Spirent Communications plc provides solutions to develop devices and equipment and to operate networks worldwide. The company operates through three segments: Networks & Security, Lifecycle Service Assurance, and Connected Devices. The Networks & Security segment develops performance and security test systems to accelerate the development of new devices, networks, and applications for high-speed Ethernet/IP, mobile, and global satellite navigation systems. The Lifecycle Service Assurance segment develops active test and analytics solutions for service turn-up, network performance improvement, and customer experience management. The Connected Devices develops automated test systems; and offers services to test new devices in the lab or on networks. The company was formerly known as Spirent plc and changed its name to Spirent Communications plc in May 2006. Spirent Communications plc was founded in 1936 and is headquartered in Crawley, the United Kingdom.

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