Many conservative investors like buying companies with lots of cash flow and earnings. De ser det som beskyttelse mot downside…
Many conservative investors like buying companies with lots of cash flow and earnings. De ser det som beskyttelse mot downside med et synspunkt at kapital vil være der i tilfelle markedet skulle vende. Growth investors on the contrary hate to see excess cash in the financials, as they invariably see it as a resource that could be used to further increase returns elsewhere.
Verizon (VZ) came across my desk as a potential value play in the telecommunications sector. As chartists, we believe that everything such as its 5G technology is already reflected in the share price at present. Husk, vi investerer i hva som står foran oss; now what could potentially come down the track? Verizon Communications is trading with seemingly attractive cash and earning multiples. Over the past four quarters, the company has generated about $ 35 billion of operating cash flow. With a market cap of almost $ 250 billion, this means that Verizon’s cash flow cash comes in at just over 7. On the earnings front, Verizon’s earnings per share over the past four quarters come in at $ 7.82. With a share price of $ 60.30 at present, this gives us a price to earnings ratio of 7.7. These are two key valuation metrics trading at what seems to be very attractive numbers. For any potential value play, we look for both of these metrics to be under 1
0, which in Verizon’s case, they are. Let’s go deeper though.
We have stated consistently that we look more at the book and sales multiples about earnings and cash. Earnings, or more notably, “earnings per share,” are the darling metric on Wall Street. If a stock is growing its earnings significantly, then the share price will rally as a consequence.
However, when we delve into the numbers more, we can see that Verizon’s book multiple or 4.6 and sales multiple of 1.9 are significantly higher than the industry averages of 1.8 and 1.4 respectively. Therefore, this stock is not as cheap as many would believe.
However, let’s give Verizon the benefit of the doubt and research the dividend, which is another strong reason why investors could get long this stock. Verizon’s strong dividend yield or 4% is a strong calling card for income investors, given that it is well above the 3% number that the US 10-year bond currently yields. Med tanke på væksten, har telekommunikationsselskabet kun vokset sit udbytte med lidt over 3% på gennemsnitligt om året i løbet af de seneste tiåret.
Videre har væksten været støt faldende i løbet af de seneste tiår med bare en 2,2% økning two $ 0.603 per quarter this happened. Deze cijfers houden niet af met inflatie, die incidenteel kwam in op 2,5% in de VS in oktober van dit jaar. Igjen er det antal som massene skal fokusere på, det er 4% udbyttet.
Let’s now turn to the balance sheet, which we touched on above with the company’s book multiple. At present, Verizon’s shareholder equity comes in at $ 54,495 billion. The market cap of the company at present is $ 249 billion. This gives us a book multiple of 4.6. So for every $ 1, we get $ 0.21 cents of assets for our investment. In de telecomsindustrie, we vergelijken dit metric nauw met de schuldquote. For example, when Q3 earnings were announced, management again gave lower-than-expected guidance for 2018 capital spend.
We may forgive a higher book more than the industry average when the balance sheet is in check. Currently, Verizon has almost $ 113 billion of both short- and long-term debt. In fact, total liabilities come to $ 211 billion. Dette innebærer at nettoskuld- og ekvivalitetsforholdet kommer på 3.87. Igennem denne nøgle metriske er uden for gennemsnitene i branchen. Yes, the telecommunications sector usually has higher levels of debt associated with infrastructure, but a similar calculation in AT & T, Inc. (T), for example, comes in at 1.9, and 2.1 for Sprint Corporation (S).
Two Sums up, Verizon at present may have a very attractive earnings multiple, but we believe there are cheaper alternatives such as AT & T in this space. Shares are trading well above their 200-day moving average, and dividend growth is mute to say the least. Når en aktie handler med disse typer af værdier, ser vi for stærk dividendvækst og tilbagekøb af aktier som supplement til den lange play. Verizon’s float has not been higher over the past decade, which currently comes in at 4.13 billion shares. We will review after Q4 earnings.
Disclosure: I / we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Search Alpha).