Cogent Communications (NASDAQ:CCOI) and Telephone and Data Systems (NYSE:TDS) Critical Analysis

Cogent Communications (NASDAQ:CCOI) and Telephone and Data Systems (NYSE:TDS) are both communication services companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, earnings, dividends, analyst recommendations, risk, valuation and institutional ownership.

Insider and Institutional Ownership

92.4% of Cogent Communications shares are owned by institutional investors. Comparatively, 80.0% of Telephone and Data Systems shares are owned by institutional investors. 4.2% of Cogent Communications shares are owned by insiders. Comparatively, 14.2% of Telephone and Data Systems shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Cogent Communications and Telephone and Data Systems, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cogent Communications	2	6	3	0	2.09
Telephone and Data Systems	0	3	2	0	2.40

Cogent Communications currently has a consensus price target of $19.55, suggesting a potential upside of 128.92%. Telephone and Data Systems has a consensus price target of $47.50, suggesting a potential upside of 41.15%. Given Cogent Communications’ higher probable upside, equities research analysts plainly believe Cogent Communications is more favorable than Telephone and Data Systems.

Earnings and Valuation

This table compares Cogent Communications and Telephone and Data Systems”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cogent Communications	$975.77 million	0.45	-$182.17 million	($0.96)	-8.90
Telephone and Data Systems	$1.23 billion	3.15	-$6.24 million	$3.00	11.22

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

Dividends

Cogent Communications pays an annual dividend of $0.08 per share and has a dividend yield of 0.9%. Telephone and Data Systems pays an annual dividend of $0.16 per share and has a dividend yield of 0.5%. Cogent Communications pays out -8.3% of its earnings in the form of a dividend. Telephone and Data Systems pays out 5.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Cogent Communications has raised its dividend for 14 consecutive years. Cogent Communications is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Cogent Communications and Telephone and Data Systems’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cogent Communications	-4.73%	N/A	-4.86%
Telephone and Data Systems	33.20%	11.97%	6.04%

Volatility & Risk

Cogent Communications has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500. Comparatively, Telephone and Data Systems has a beta of 0.32, suggesting that its stock price is 68% less volatile than the S&P 500.

Summary

Telephone and Data Systems beats Cogent Communications on 10 of the 17 factors compared between the two stocks.

About Cogent Communications

Cogent Communications Holdings, Inc., through its subsidiaries, provides high-speed Internet access, private network, and data center colocation space services in North America, Europe, Oceania, South America, and Africa. The company offers on-net Internet access and private network services to law firms, financial services firms, and advertising and marketing firms, as well as heath care providers, educational institutions and other professional services businesses, other Internet service providers, telephone companies, cable television companies, web hosting companies, media service providers, mobile phone operators, content delivery network companies, and commercial content and application service providers. It also provides Internet access and private network services to customers that are not located in buildings directly connected to its network; and on-net services to customers located in buildings that are physically connected to its network. In addition, the company offers off-net services to corporate customers using other carriers' circuits to provide the last mile portion of the link from the customers' premises to the network. Further, it operates data centers that allow its customers to collocate their equipment and access the network. It serves primarily to small and medium-sized businesses, communications service providers, and other bandwidth-intensive organizations. Cogent Communications Holdings, Inc. was founded in 1999 and is headquartered in Washington, the District of Columbia.

About Telephone and Data Systems

Telephone and Data Systems, Inc., a telecommunications company, provides communications services in the United States. It operates through two segments: UScellular and TDS Telecom. The company offers wireless solutions to consumers, and business and government customers, including a suite of connected Internet of things (IoT) solutions, and software applications for monitor and control, business automation/operations, communication, fleet and asset management, smart water solutions, private cellular networks and custom, and end-to-end IoT solutions; wireless priority services and quality priority and preemption options; smartphones and other handsets, tablets, wearables, mobile hotspots, fixed wireless home internet, and IoT devices; and accessories, such as cases, screen protectors, chargers, and memory cards, as well as consumer electronics, including audio, home automation and networking products. It also provides replace and repair services; Trade-In program through which it buys customers' used equipment; internet connections and all-home Wi-Fi services; TDS TV+, an integrated cloud television platform that offers video content and features; local and long-distance telephone service, voice over internet protocol, and enhanced services; broadband, IP-based services, and hosted voice and video collaboration services; and communication services in underserved areas. The company sells its products through retail stores, direct and indirect sales, third-party retailers, and independent agents, as well as through ecommerce and telesales. Telephone and Data Systems, Inc. was incorporated in 1968 and is headquartered in Chicago, Illinois.