Centurylink (CTL) and China Telecom (CHA) Critical Review

Centurylink (NYSE: CTL) and China Telecom (NYSE:CHA) are both large-cap computer and technology companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, profitability and risk.

Volatility & Risk

Centurylink has a beta of 0.79, meaning that its share price is 21% less volatile than the S&P 500. Comparatively, China Telecom has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500.

Dividends

Centurylink pays an annual dividend of $2.16 per share and has a dividend yield of 11.7%. China Telecom pays an annual dividend of $1.32 per share and has a dividend yield of 2.9%. Centurylink pays out 146.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. China Telecom pays out 38.8% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares Centurylink and China Telecom’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Centurylink $17.66 billion 1.13 $1.39 billion $1.47 12.61
China Telecom $54.20 billion 0.69 $2.76 billion $3.40 13.52

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

Analyst Ratings

This is a summary of recent recommendations and price targets for Centurylink and China Telecom, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Centurylink 1 6 7 0 2.43
China Telecom 0 2 3 0 2.60

Centurylink presently has a consensus price target of $21.00, indicating a potential upside of 13.33%. Given Centurylink’s higher possible upside, analysts plainly believe Centurylink is more favorable than China Telecom.

Profitability

This table compares Centurylink and China Telecom’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Centurylink 6.92% 4.94% 1.43%
China Telecom N/A N/A N/A

Institutional & Insider Ownership

78.6% of Centurylink shares are held by institutional investors. Comparatively, 0.6% of China Telecom shares are held by institutional investors. 0.6% of Centurylink shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Centurylink beats China Telecom on 10 of the 15 factors compared between the two stocks.

About Centurylink

CenturyLink, Inc. provides various communications services to residential, business, wholesale, and governmental customers primarily in the United States. It operates in two segments, Business and Consumer. The company offers virtual private network data network services; Ethernet services; Internet protocol services; CenturyLink Prism TV that allows customers to watch television or cable channels and record up to four shows on one home digital video recorder; and Vyvx, which provides audio and video feeds over fiber or satellite for broadcast and production customers, as well as satellite digital television services. It also provides broadband services, which allow customers to connect to the Internet through their existing telephone lines or fiber-optic cables; private line solution for transmission of data between sites; colocation and data center services comprising cloud, hosting, and application management solutions; wavelength services that provide customers required bandwidth with an end-to-end transport solution of a bandwidth; and network security solutions, as well as sells telecommunications equipment and resells software, and provides network management, installation and maintenance of data equipment, and building of fiber-optic broadband networks. In addition, the company offers local calling services; long-distance and toll-free services; information technology (IT) services, such as transporting and delivering enterprise data and applications; and managed services consisting of network, hosting, cloud, and IT services. Further, it leases and subleases space in its office buildings, warehouses, and other properties. As of December 31, 2017, the company operated approximately 10.3 million total access lines; and served approximately 5.7 million broadband subscribers. CenturyLink, Inc. was founded in 1968 and is based in Monroe, Louisiana.

About China Telecom

China Telecom Corporation Limited, together with its subsidiaries, provides wireline and mobile telecommunications services primarily in the People's Republic of China. It offers wireline voice services, including local wireline telephone services and long distance wireline services; CDMA mobile voice services, such as local calls, domestic and international long distance calls, intra-provincial roaming, and inter-provincial roaming and international roaming; wireline Internet access services comprising dial-up and broadband services; wireless Internet access services; and wireline, Internet, and mobile value-added services. The company also provides Best Tone information services; and information technology-based integrated solutions, such as system integration, outsourcing, special advisory, information application, knowledge, and software development services. In addition, it offers managed data services that include digital data network, frame relay, and asynchronous transfer mode services for government agencies, large corporations, and institutions; and leased line services, as well as sells, repairs, and maintains customer-end equipment. Further, the company provides international telecommunications services, including lease of network equipment, international Internet access and transit, Internet data center, and mobile virtual network services in various countries, including the Asia Pacific, Europe, Africa, South America, and North America; and music production and related information, instant messenger, and e-commerce services, as well as sells telecommunications terminals and calling cards. As of December 31, 2017, it had approximately 122 million access lines in service; 134 million wireline broadband subscribers; and 250 million mobile subscribers. The company was incorporated in 2002 and is based in Beijing, the People's Republic of China. China Telecom Corporation Limited is a subsidiary of China Telecommunications Corporation.

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