A Look at Verizon’s Value Proposition in the US Telecom Market



Verizon’s scale

Earlier in this series, we looked at some expectations regarding the performance of Verizon (VZ) in the upcoming 3Q16 earnings announcement. In this part of the series, we’ll look at some valuecentric measures for Verizon among the major companies in the US wireless space.

Let’s start with the size of the top four US wireless carriers: Verizon, AT&T (T), T-Mobile (TMUS), and Sprint (S).

On October 4, 2016, AT&T was the largest US telecom player by market capitalization, followed by Verizon. On the same date, T-Mobile was the third-largest player by market capitalization. Sprint’s market capitalization remained lower than T-Mobile’s on October 4, 2016.

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Verizon’s multiples

Price-based multiples take into account a company’s value from a shareholder’s perspective. Enterprise value–based multiples help investors understand the value of a company via its sources of capital. These are forward multiples based on expected values after a year.

Let’s look at the earnings multiples for Verizon and its peers. Verizon was trading at a forward PE (price-to-earnings) multiple of ~12.9x on October 4, 2016. This metric was lower than AT&T’s forward PE multiple of ~13.5x on the same date.

Verizon’s forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] metric was ~6.7x on October 4, 2016. This metric was higher than Sprint and T-Mobile, with forward EV-to-EBITDA values of ~5.5x and ~5.8x, respectively, on the same date.

In the final article in this series, we’ll look at analysts’ recommendations for Verizon’s stock.


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