Critical Survey: Telephone and Data Systems (TDS) vs. Gogo (GOGO)

Telephone and Data Systems (NYSE: TDS) and Gogo (NASDAQ:GOGO) are both utilities companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, valuation, risk and profitability.

Insider and Institutional Ownership

83.8% of Telephone and Data Systems shares are held by institutional investors. Comparatively, 69.9% of Gogo shares are held by institutional investors. 17.3% of Telephone and Data Systems shares are held by company insiders. Comparatively, 37.3% of Gogo shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Telephone and Data Systems and Gogo’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telephone and Data Systems $5.10 billion 0.56 $43.00 million ($1.27) -20.43
Gogo $596.55 million 1.57 -$124.50 million ($1.99) -5.41

Telephone and Data Systems has higher revenue and earnings than Gogo. Telephone and Data Systems is trading at a lower price-to-earnings ratio than Gogo, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Telephone and Data Systems has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500. Comparatively, Gogo has a beta of 1.7, suggesting that its share price is 70% more volatile than the S&P 500.

Dividends

Telephone and Data Systems pays an annual dividend of $0.62 per share and has a dividend yield of 2.4%. Gogo does not pay a dividend. Telephone and Data Systems pays out -48.8% of its earnings in the form of a dividend. Telephone and Data Systems has raised its dividend for 42 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Telephone and Data Systems and Gogo, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telephone and Data Systems 0 1 1 0 2.50
Gogo 1 1 3 0 2.40

Gogo has a consensus price target of $14.19, indicating a potential upside of 31.85%. Given Gogo’s higher possible upside, analysts clearly believe Gogo is more favorable than Telephone and Data Systems.

Profitability

This table compares Telephone and Data Systems and Gogo’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telephone and Data Systems -2.77% 1.08% 0.55%
Gogo -23.51% N/A -12.24%

Summary

Telephone and Data Systems beats Gogo on 11 of the 16 factors compared between the two stocks.

About Telephone and Data Systems

Telephone and Data Systems, Inc. is a diversified telecommunications company. The Company is engaged in conducting its Wireless operations through its subsidiary, United States Cellular Corporation (U.S. Cellular), as well as providing its wireline services, cable services, and hosted and managed services (HMS), through its subsidiary, TDS Telecommunications Corporation (TDS Telecom). It operates through four business segments: U.S. Cellular, Wireline, Cable, and Hosted and Managed Services. U.S. Cellular provides service to postpaid and prepaid customers. Wireline operations provide retail telecommunications services to both residential and commercial customers. Wireline offers services, including broadband, video, voice and network access services. Cable offers broadband, video and voice services under TDS and BendBroadband brand names. It provides a range of information technology (IT) services, including colocation, and cloud and hosting solutions through its HMS business.

About Gogo

Gogo Inc. is a holding company. The Company is a provider of in-flight broadband connectivity and connectivity-enabled services to commercial and business aviation. The Company operates through three segments: Commercial Aviation North America (CA-NA), Commercial Aviation Rest of World (CA-ROW) and Business Aviation (BA). The CA-NA segment offers air-to-ground (ATG) and satellite connectivity and entertainment services to commercial aircraft flying routes generally within North America. The CA-ROW segment offers satellite connectivity and entertainment services, using 2Ku and Ku solutions, to commercial aircraft flying routes outside of North America. The Company’s BA segment offers a suite of integrated equipment, network and Internet connectivity products and services to the business aviation market. As of December 31, 2016, it provided services on 2,943 commercial aircraft. The Company offers a package of airborne equipment for its ATG-4/ATG and satellite services.

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