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What Are CenturyLink’s Major Long-Term Growth Drivers?

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Part 7
What Are CenturyLink’s Major Long-Term Growth Drivers? PART 7 OF 9

What Does CenturyLink’s Current Valuation Indicate?

CenturyLink’s scale

On September 1, 2017, AT&T (T) was the biggest US telecom carrier by market capitalization, reporting a market cap level of ~$230.1 billion. AT&T was followed by Verizon (VZ), with a market cap of ~$195.5 billion.

In the US wireline space, CenturyLink’s (CTL) market capitalization was ~$11.0 billion, as shown in the chart below. Windstream’s (WIN) market cap was ~0.4 billion, and Frontier Communications (FTR) reported a market cap of ~$1.1 billion.

What Does CenturyLink’s Current Valuation Indicate?

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Bollinger Band

In the September 1 trading session, CenturyLink (CTL) stock closed at $20.04, near its Bollinger Band midrange level of $20.63. This suggests that CenturyLink’s stock is neither overbought nor oversold.

CenturyLink’s forward EV-to-EBITDA valuation

The forward EV-to-EBITDA1 multiple is the most appropriate valuation multiple used for valuing telecom companies like CenturyLink.

On September 1, 2017, CenturyLink was trading at a forward EV-to-EBITDA multiple of ~6.2x. Windstream and Frontier Communications had similar forward EV-to-EBITDA multiples of ~5.4x and ~5.3x, respectively.

Short interest ratio

On September 1, 2017, CenturyLink’s short interest as a percentage of its shares outstanding (or short interest ratio) was ~13.0%. When a stock’s short interest ratio is greater than 40.0%, it typically means that investors and traders expect a correction in the stock’s price.

  1. enterprise value to earnings before interest, tax, depreciation, and amortization
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