Analyzing Cogent Communications (CCOI) and Frontier Communications (FTR)

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

Institutional & Insider Ownership

61.6% of Frontier Communications shares are owned by institutional investors. Comparatively, 94.1% of Cogent Communications shares are owned by institutional investors. 0.9% of Frontier Communications shares are owned by company insiders. Comparatively, 9.5% of Cogent Communications shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Frontier Communications -9.17% -1.97% -0.28%
Cogent Communications 3.37% -23.86% 2.18%

Analyst Recommendations

This is a summary of current ratings for Frontier Communications and Cogent Communications, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Frontier Communications 5 8 1 0 1.71
Cogent Communications 5 6 2 0 1.77

Frontier Communications presently has a consensus target price of $9.33, indicating a potential upside of 18.04%. Cogent Communications has a consensus target price of $41.40, indicating a potential downside of 3.50%. Given Frontier Communications’ higher possible upside, equities analysts plainly believe Frontier Communications is more favorable than Cogent Communications.

Risk and Volatility

Frontier Communications has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500. Comparatively, Cogent Communications has a beta of 0.49, indicating that its stock price is 51% less volatile than the S&P 500.

Earnings & Valuation

This table compares Frontier Communications and Cogent Communications’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Frontier Communications $8.90 billion 0.07 -$373.00 million ($13.81) -0.57
Cogent Communications $446.90 million 4.41 $14.92 million $0.36 119.17

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

Dividends

Frontier Communications pays an annual dividend of $2.40 per share and has a dividend yield of 30.4%. Cogent Communications pays an annual dividend of $1.92 per share and has a dividend yield of 4.5%. Frontier Communications pays out -17.4% of its earnings in the form of a dividend. Cogent Communications pays out 533.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Frontier Communications is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Cogent Communications beats Frontier Communications on 9 of the 15 factors compared between the two stocks.

About Frontier Communications

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 Cogent Communications

Cogent Communications Holdings, Inc. is a facilities-based provider of Internet access and Internet Protocol (IP), communications services. The Company’s network is specifically designed and optimized to transmit data using IP. The Company delivers its services primarily to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations in North America, Europe and in Japan. The Company offers on-net services in over 175 metropolitan markets. The Company serves 1,990 on-net buildings. The Company’s on-net service in North America is its Fast Ethernet service, which provides Internet access at 100 megabits per second. It also offers Internet access services at higher speeds of up to ten Gigabits per second. These services are generally used by customers that have businesses, such as Web hosting, that are Internet-based.

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