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Analyzing Frontier’s Scale and Valuation

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Frontier’s scale

Earlier in this series, we looked at certain aspects of Frontier Communications’ (FTR) operations after the acquisition of Verizon’s (VZ) wireline assets in CTF (California, Texas, and Florida) markets on April 1, 2016. In this part of the series, we’ll look at some valuation metrics for Frontier and peers. Let’s start with Frontier’s scale.

As you can see in the above graph, as of April 25, 2017, Frontier had a market capitalization of ~$2.3 billion. In the US wireline space, this metric for Windstream (WIN) and CenturyLink (CTL) was ~$1.1 billion and ~$14.2 billion, respectively. The figures for Verizon and AT&T (T), the integrated US telecom players, were significantly higher, at ~$190.5 billion and ~$245.8 billion, respectively.

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Frontier’s valuation multiples

EV[1.enterprise value]-based multiples help investors understand the value of a company based on its sources of capital from shareholders’ point of view. It is a forward multiple based on expected values after a year.

As of April 25, 2017, Frontier’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple was ~5.48x, which was higher than Windstream’s ~5.37x. CenturyLink had similar EV-to-EBITDA metric, with ~5.52x. In the next part of this series, we’ll look at analysts’ recommendations for Frontier stock.

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