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

Risk & Volatility

Frontier Communications Corporation has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500. Comparatively, FairPoint Communications has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500.

Dividends

Frontier Communications Corporation pays an annual dividend of $2.40 per share and has a dividend yield of 17.7%. FairPoint Communications does not pay a dividend. Frontier Communications Corporation pays out -16.6% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of current ratings for Frontier Communications Corporation and FairPoint Communications, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Frontier Communications Corporation 2 9 2 0 2.00
FairPoint Communications 0 1 0 0 2.00

Frontier Communications Corporation presently has a consensus price target of $7.33, indicating a potential downside of 45.88%. FairPoint Communications has a consensus price target of $17.00, indicating a potential upside of 6.58%. Given FairPoint Communications’ higher probable upside, analysts plainly believe FairPoint Communications is more favorable than Frontier Communications Corporation.

Institutional and Insider Ownership

88.6% of FairPoint Communications shares are held by institutional investors. 0.9% of Frontier Communications Corporation shares are held by company insiders. Comparatively, 7.6% of FairPoint Communications shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Frontier Communications Corporation -9.35% -1.28% -0.19%
FairPoint Communications -11.81% N/A -7.88%

Earnings and Valuation

This table compares Frontier Communications Corporation and FairPoint Communications’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Frontier Communications Corporation $9.59 billion 0.11 $3.74 billion ($14.42) -0.94
FairPoint Communications N/A N/A N/A $2.27 7.03

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

Summary

Frontier Communications Corporation beats FairPoint Communications on 7 of the 12 factors compared between the two stocks.

About Frontier Communications Corporation

Frontier Communications Corporation (Frontier) is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.

About FairPoint Communications

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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