Analyzing Verizon’s Valuation Multiples after 1Q18 Results

Market caps of mobile network providers

On April 24, Verizon’s (VZ) market cap was ~$202.6 billion, making it the second-largest US wireless service provider by market cap, after AT&T (T), which had a market cap of ~$214.9 billion. In comparison, Sprint (S) had a market cap of ~$23.7 billion while T-Mobile (TMUS) and Charter (CHTR) had market caps of ~$53.5 billion and ~$71.6 billion, respectively.

Analyzing Verizon’s Valuation Multiples after 1Q18 Results

Valuation metrics for Verizon

Valuation metrics consist of price-based multiples and earnings-based multiples. On April 24, Verizon had a trailing EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 6.96x. AT&T, Sprint, and T-Mobile EV-to-EBITDA multiples of 6.61x, 5.09x, and 7.79x, respectively.

Verizon expects its EV-to-EBITDA in 2018 to be 6.64x. In 2019, the multiple is expected to be 6.53x.

Verizon is now trading at a PE (price-to-earnings) multiple of 14.96x. In 2018, the PE multiple is expected to reach 10.69x. In 2019, the multiple is expected to be 10.42x. In comparison, peers AT&T and T-Mobile are trading at PE multiples of 23.47x and 23.75x, respectively.

Price movements for Verizon and peers

On April 24, Verizon’s stock closed up 2.08% at $49.67 for the day. However, on a year-to-date basis, Verizon’s stock price declined 3.9%, compared to the S&P 500’s negative return of -1.5%. Stock prices for AT&T, Charter, and T-Mobile were down 7.5%, 10.3%, and 1.5%, respectively. However, Sprint was slightly up, by 0.2% on a YTD basis, as of April 24.