Telefonica (TEF) vs. FairPoint Communications (FRP) Financial Analysis

Telefonica (NYSE: TEF) and FairPoint Communications (NASDAQ:FRP) are both utilities companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, profitability, valuation, risk, analyst recommendations and institutional ownership.

Insider and Institutional Ownership

0.9% of Telefonica shares are owned by institutional investors. Comparatively, 88.6% of FairPoint Communications shares are owned by institutional investors. 0.0% of Telefonica shares are owned by insiders. Comparatively, 7.6% of FairPoint Communications shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Telefonica and FairPoint Communications, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telefonica 1 3 5 0 2.44
FairPoint Communications 0 1 0 0 2.00

Telefonica currently has a consensus price target of $11.40, indicating a potential upside of 16.80%. FairPoint Communications has a consensus price target of $17.00, indicating a potential upside of 6.58%. Given Telefonica’s stronger consensus rating and higher possible upside, research analysts plainly believe Telefonica is more favorable than FairPoint Communications.

Valuation and Earnings

This table compares Telefonica and FairPoint Communications’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telefonica $57.59 billion 0.85 $2.62 billion $0.50 19.52
FairPoint Communications N/A N/A N/A $2.27 7.03

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

Profitability

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

Net Margins Return on Equity Return on Assets
Telefonica 4.95% 29.25% 6.62%
FairPoint Communications -11.81% N/A -7.88%

Risk & Volatility

Telefonica has a beta of 1.29, meaning that its share price is 29% more volatile than the S&P 500. Comparatively, FairPoint Communications has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500.

Dividends

Telefonica pays an annual dividend of $0.35 per share and has a dividend yield of 3.6%. FairPoint Communications does not pay a dividend. Telefonica pays out 70.0% of its earnings in the form of a dividend.

Summary

Telefonica beats FairPoint Communications on 9 of the 13 factors compared between the two stocks.

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).

FairPoint Communications Company Profile

FairPoint Communications, Inc. is a provider of data, voice and communications services to business, wholesale and residential customers within its service territories. The Company offers its customers a suite of services, such as Ethernet, Session Initiation Protocol Trunking (SIP-Trunking), hosted Primary Branch Exchange (hosted PBX), managed services, data center colocation services, high capacity data transport and other Internet protocol (IP)-based services over its fiber-based network. It also offers Internet access, high-speed data, and local and long distance voice services. It provides services, such as Data and Internet Services, which include optical, Ethernet, Ethernet virtual circuit technology for cellular backhaul and private line special access services. It offers Voice Services, which include Local Calling Services, Long Distance Services and 9-1-1 Services. It also offers Network Transport Services, Interstate Access Charges and Intrastate Access Charges.

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