Today we're going to take a closer look at Large-Cap Telecommunications company Verizon Communications, whose shares are currently trading at $39.81. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Verizon Communications Is Potentially Undervalued and Trades Close Its Graham Number:
Verizon Communications Inc., through its subsidiaries, engages in the provision of 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 20.57 and an average price to book (P/B) ratio of 2.36. In contrast, Verizon Communications has a trailing 12 month P/E ratio of 17.2 and a P/B ratio of 1.74.
Verizon Communications has moved 6.6% over the last year compared to 25.1% for the S&P 500 — a difference of -18.6%. Verizon Communications has a 52 week high of $45.36 and a 52 week low of $37.15.
The Firm Has a Declining EPS Growth Trend:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $130,863 | $131,868 | $128,292 | $133,613 | $136,835 | $133,974 |
| Operating Margins | 17% | 23% | 22% | 24% | 22% | 17% |
| Net Margins | 12% | 15% | 14% | 17% | 16% | 9% |
| Net Income (M) | $15,528 | $19,265 | $17,801 | $22,065 | $21,256 | $11,614 |
| Net Interest Expense (M) | $4,833 | $4,730 | $4,247 | $3,485 | $3,613 | $5,524 |
| Depreciation & Amort. (M) | $17,403 | $16,682 | $16,720 | $16,206 | $17,099 | $17,624 |
| Diluted Shares (M) | 4,132 | 4,140 | 4,142 | 4,150 | 4,204 | 4,215 |
| Earnings Per Share | $3.76 | $4.65 | $4.3 | $5.32 | $5.06 | $2.75 |
| EPS Growth | n/a | 23.67% | -7.53% | 23.72% | -4.89% | -45.65% |
| Avg. Price | $40.57 | $47.21 | $48.98 | $48.98 | $47.48 | $39.52 |
| P/E Ratio | 10.79 | 10.13 | 11.39 | 9.21 | 9.38 | 14.32 |
| Free Cash Flow (M) | $17,681 | $17,807 | $23,576 | $19,253 | $14,054 | $18,708 |
| CAPEX (M) | $16,658 | $17,939 | $18,192 | $20,286 | $23,087 | $18,767 |
| EV / EBITDA | 6.95 | 6.46 | 6.67 | 7.05 | 7.09 | 7.45 |
| Total Debt (M) | $113,063 | $111,489 | $123,173 | $143,425 | $140,676 | $137,701 |
| Net Debt / EBITDA | 2.78 | 2.31 | 2.22 | 2.89 | 2.9 | 3.35 |
| Current Ratio | 0.91 | 0.84 | 1.38 | 0.78 | 0.75 | 0.69 |
Verizon Communications has slight revenue growth and a flat capital expenditure trend, decent operating margins with a stable trend, and significant leverage levels. We also note that the company has generally positive cash flows working in its favor. However, the firm suffers from declining EPS growth and not enough current assets to cover current liabilities because its current ratio is 0.69.
