Verizon’s Value Proposition in the US Telecom Market

Why Is Verizon's Earnings Growth Expected to Slow Down in 1Q16?

(Continued from Prior Part)

Verizon’s scale in the global telecom space

Earlier in this series, we learned about the Wall Street analysts’ expectations for Verizon’s (VZ) 1Q16 results. Now, we will look at the value proposition of the company among select telecommunication companies in the US. Let’s start with Verizon’s size.

As of April 12, 2016, Verizon was the third-largest telecom company by market capitalization in the world. AT&T was the largest global telecom player in this parameter. The second-largest global telecom player by market capitalization was China Mobile (CHL) as of the same date.

Enterprise value multiples of Verizon

Now let’s look at Verizon’s EV-to-EBITDA multiple, as well as for select telecom players in the US. Verizon was trading at a forward EV-to-EBITDA multiple of ~6.9x on April 12, 2016. This metric was higher than the comparable EV-to-EBITDA multiple for AT&T of ~6.6x.

In the wireline telecom space in the US, the same metrics for CenturyLink (CTL) and Frontier Communications (FTR) were ~5.6x and ~5.8x, respectively, as of April 12, 2016. In the US wireless space, the forward EV-to-EBITDA of T-Mobile (TMUS) was ~5.4x on the same date.

Dividend yield of Verizon

Verizon’s forward dividend yield was ~4.4% on April 12, 2016. It was lower than the same metric for AT&T at ~5%. Meanwhile, the same figures for Frontier and CenturyLink were ~8.2% and ~6.8%, respectively, as of April 12, 2016.

Instead of taking direct exposure to Verizon’s stock, you may consider diversified exposure to the company by investing in the SPDR Dow Jones Industrial Average ETF (DIA). DIA held ~2.1% in the telecom company at the end of March 2016.

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