What Does CenturyLink’s Current Valuation Indicate?
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.
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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.
- enterprise value to earnings before interest, tax, depreciation, and amortization ↩