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A Look at Frontier’s Scale and Valuation

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Frontier’s scale

In the earlier parts of this series, we looked at certain aspects of Frontier Communications’ (FTR) operations after the April 1, 2016, acquisition of Verizon’s (VZ) wireline assets in the CTF (California, Texas, Florida) market. Now let’s look at some value-centric metrics for Frontier and some of its peers in the US telecommunications market. Let’s start with Frontier’s scale.

As you can see in the above graph, as of March 23, 2017, Frontier had a market capitalization of ~$2.3 billion. In the US wireline space, that metric for Windstream Holdings (WIN) and CenturyLink (CTL) was ~$1.0 billion and ~$12.4 billion, respectively. The figures for Verizon and AT&T (T), the integrated US telecommunication players, were significantly higher than these US wireline players at ~$202.5 billion and ~$255.8 billion, respectively, as of March 23, 2017.

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Frontier’s valuation multiples

Multiples based on enterprise value help investors understand the value of a company by its sources of capital from a shareholder’s point of view. It’s a forward multiple based on expected values after a year.

As of March 23, 2017, Frontier’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) metric was ~5.5x, which was higher than Windstream’s at ~5.4x. CenturyLink had a similar EV-to-EBITDA metric of ~5.2x.

In the next part of this series, we’ll look at analysts’ recommendations for Frontier stock.

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