Verizon Communications Inc. offers communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. Its Consumer segment provides postpaid and prepaid service plans; internet access on notebook computers and tablets; wireless equipment, including smartphones and other handsets; and wireless-enabled internet devices, such as tablets, and other wireless-enabled connected devices, such as smart watches. It also provides residential fixed connectivity solutions, including internet, video, and voice services; and sells network access to mobile virtual network operators. As of December 31, 2020, it had approximately 94 million wireless retail connections, 7 million broadband connections, and 4 million Fios video connections. The company’s Business segment provides network connectivity products, including private networking, private cloud connectivity, virtual and software defined networking, and internet access services; and internet protocol-based voice and video services, unified communications and collaboration tools, and customer contact center solutions. Verizon Communications Inc. was incorporated in 1983 and is headquartered in New York, New York. This week, I fundamentally analyze Verizon’s stock. I review Verizon’s operating segments, look at its key ratios, and derive the intrinsic value using Discounted Cash Flow (DCF) analysis. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account Verizon’s 2020 free cash flow of $21,450 million figure, a 5% growth rate of FCF (growth for the next 10 years), 10% discount rate, 2% long term growth rate (growth from 10 year mark to perpetuity), 4,144 million shares outstanding, and $123,173 million of long term debt, the DCF analysis yields us an intrinsic value of $50.27 per share. When we drop the discount rate to 8.5% (which is 3% higher than Verizon’s WACC), the intrinsic value comes to $70.32 per share.
Timestamp
0:00 Introduction / Operating Segments
2:43 Key Ratios Analysis
12:55 Discounted Cash Flow Analysis / Intrinsic Value
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References:
Verizon’s Website: here.
Morningstar Key Ratios Link: here.
Useful Resources here.
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