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How Does Frontier Communications’ Valuation Look?

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Frontier’s scale

On February 5, Verizon (VZ) was the largest US telecommunications player by market cap at $223.7 billion, followed by AT&T (T) at $215.7 billion. In the US wireline space, Frontier Communications (FTR) had a market cap of $0.2 billion. Meanwhile, CenturyLink (CTL) and Windstream Holdings (WIN) had market caps of $15.8 billion and $0.1 billion, respectively, on the day.

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Short interest ratio

As of February 5, Frontier stock’s short interest as a percentage of float (or short interest ratio) was ~40.1%. When a stock has a short interest ratio of more than 40%, it suggests that investors and traders foresee a correction in its price.

Frontier’s EV-to-EBITDA valuation

On February 5, Frontier had a trailing-12-month EV-to-EBITDA (enterprise value-to-EBITDA) multiple of ~5.02x compared to the multiples of its closest peers. CenturyLink and Windstream Holdings had trailing-12-month EV-to-EBITDA multiples of ~6.49x and ~5.49x, respectively.

Frontier expects its EV-to-EBITDA multiple to be ~5.13x in 2019, while in 2020, it expects this multiple to be ~5.42x.

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