BCE (NYSE: BCE) and FairPoint Communications (NASDAQ:FRP) are both utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, valuation, institutional ownership, risk and dividends.

Dividends

BCE pays an annual dividend of $2.13 per share and has a dividend yield of 4.6%. FairPoint Communications does not pay a dividend. BCE pays out 87.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Volatility and Risk

BCE has a beta of 0.36, suggesting that its share price is 64% less volatile than the S&P 500. Comparatively, FairPoint Communications has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500.

Valuation and Earnings

This table compares BCE and FairPoint Communications’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BCE $17.69 billion 2.35 $6.63 billion $2.44 18.95
FairPoint Communications N/A N/A N/A $2.27 7.03

BCE has higher revenue and earnings than FairPoint Communications. FairPoint Communications is trading at a lower price-to-earnings ratio than BCE, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

44.0% of BCE shares are held by institutional investors. Comparatively, 88.6% of FairPoint Communications shares are held by institutional investors. 0.2% of BCE shares are held by insiders. Comparatively, 7.6% of FairPoint Communications shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares BCE and FairPoint Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BCE 12.85% 21.08% 5.78%
FairPoint Communications -11.81% N/A -7.88%

Analyst Ratings

This is a summary of current recommendations and price targets for BCE and FairPoint Communications, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BCE 0 4 4 0 2.50
FairPoint Communications 0 1 0 0 2.00

BCE presently has a consensus target price of $57.25, suggesting a potential upside of 23.81%. FairPoint Communications has a consensus target price of $17.00, suggesting a potential upside of 6.58%. Given BCE’s stronger consensus rating and higher probable upside, analysts clearly believe BCE is more favorable than FairPoint Communications.

Summary

BCE beats FairPoint Communications on 9 of the 13 factors compared between the two stocks.

BCE Company Profile

BCE Inc. is a communications company. The Company’s segments include Bell Wireless, Bell Wireline and Bell Media. Its Bell Wireless segment provides wireless voice and data communications products and services to its residential, small and medium-sized business and large enterprise customers across Canada. Its Bell Wireline segment provides data, including Internet access and Internet protocol television (IPTV), local telephone, long distance, as well as other communications services and products to its residential, small and medium-sized business and large enterprise customers, primarily in Ontario, Quebec and the Atlantic provinces, while Satellite television (TV) service and connectivity to business customers are available nationally across Canada. Its Bell Media segment provides conventional, specialty and pay Television, digital media, and radio broadcasting services and out of home (OOH) advertising services to customers across Canada.

FairPoint Communications Company Profile

FairPoint Communications, Inc. is a provider of data, voice and communications services to business, wholesale and residential customers within its service territories. The Company offers its customers a suite of services, such as Ethernet, Session Initiation Protocol Trunking (SIP-Trunking), hosted Primary Branch Exchange (hosted PBX), managed services, data center colocation services, high capacity data transport and other Internet protocol (IP)-based services over its fiber-based network. It also offers Internet access, high-speed data, and local and long distance voice services. It provides services, such as Data and Internet Services, which include optical, Ethernet, Ethernet virtual circuit technology for cellular backhaul and private line special access services. It offers Voice Services, which include Local Calling Services, Long Distance Services and 9-1-1 Services. It also offers Network Transport Services, Interstate Access Charges and Intrastate Access Charges.

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