We've been asking ourselves recently if the market has placed a fair valuation on Verizon Communications. Let's dive into some of the fundamental values of this large-cap Telecommunications company to determine if there might be an opportunity here for value-minded investors.
Verizon Communications's Earnings and Assets May Be Undervalued:
Verizon Communications Inc., through its subsidiaries, provides communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. The company belongs to the Telecommunications sector, which has an average price to earnings (P/E) ratio of 23.78 and an average price to book (P/B) ratio of 3.46. In contrast, Verizon Communications has a trailing 12 month P/E ratio of 7.5 and a P/B ratio of 1.6.
Verizon Communications's PEG ratio is 15.09, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Irregular Cash Flows With a Flat Trend:
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
---|---|---|---|---|---|---|
Revenue (MM) | $130,863 | $131,868 | $128,292 | $133,613 | $136,835 | $134,095 |
Revenue Growth | n/a | 0.77% | -2.71% | 4.15% | 2.41% | -2.0% |
Operating Margins | 17% | 23% | 22% | 24% | 22% | 22% |
Net Margins | 12% | 15% | 14% | 17% | 16% | 16% |
Net Income (MM) | $16,039 | $19,788 | $18,348 | $22,618 | $21,748 | $21,366 |
Net Interest Expense (MM) | $4,833 | $4,730 | $4,247 | $3,485 | $3,613 | $5,030 |
Depreciation & Amort. (MM) | $17,403 | $16,682 | $16,720 | $16,206 | $17,099 | $17,326 |
Earnings Per Share | $3.76 | $4.65 | $4.3 | $5.32 | $5.06 | $4.96 |
EPS Growth | n/a | 23.67% | -7.53% | 23.72% | -4.89% | -1.98% |
Diluted Shares (MM) | 4,132 | 4,140 | 4,142 | 4,150 | 4,204 | 4,236 |
Free Cash Flow (MM) | $17,681 | $17,807 | $23,576 | $19,253 | $14,054 | $16,300 |
Capital Expenditures (MM) | $16,658 | $17,939 | $18,192 | $20,286 | $23,087 | $21,440 |
Current Ratio | 0.91 | 0.84 | 1.38 | 0.78 | 0.75 | 0.68 |
Total Debt (MM) | $113,063 | $111,489 | $134,213 | $151,268 | $151,204 | $147,956 |
Net Debt / EBITDA | 2.78 | 2.31 | 2.46 | 3.05 | 3.12 | 3.07 |