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About Verizon Communications

Let’s face it, the telecommunications sector isn’t really all that exciting.

Sure, it was likely the talk of the town in the late 19th century, however, wires, cables, electromagnetic systems and various connections and integrations thereof have become increasingly more mainstream as technology has continued to develop at a more than rapid, exponential pace.

Headquartered in New York City, Verizon has been an innovative, long-term leading telecommunications behemoth, as it reportedly holds nearly 28% market share of the telecommunications industry, which, mind you is home to fierce competition such as the likes of the leader (in terms of revenue) of the telecommunications sector, AT&T, Comcast, globally renowned telecom company with the bulk of its operations and capabilities in Europe, Vodafone, China Mobile, T-Mobile among many other regional and global carriers that keep the company on its toes.

Although the telecommunications sector is fairly seasoned and not terribly interesting, many neglect to mention how companies within the space actually generate revenue.

Let’s take a second to clear this up.

First and foremost, the company is categorized as a wireless network operator and is subsequently tasked with implementing, monitoring and perfecting the networks through which its various service offerings operate. 

After all, Verizon isn’t merely just a telephone company.

Verizon, like many of its other aforementioned foes, generates revenue through providing connectivity with data and usage and other supplemental solutions for individuals, family units as well as businesses and other organizations, of which includes phones.

In essence, selling connectivity, through a wide array of mediums through its platform is the name of the game for a company such as Verizon.

This leads us to believe that the company is, to a large degree, recession resistant, as irrespective of the state of the economy people will always need to connect, whatever the channel may be.

So, that’s the telecommunications industry and Verizon in a nutshell.

Now that we have you hooked on Verizon (hopefully), let’s see if this company’s stock is as blue chip as presumed and ultimately, whether or not it is a worthy consideration for your current investment portfolio.

Verizon’s stock financials

If we didn’t make it clear enough before, Verizon is a very, very large company.

But don’t feel the need to believe us; just take a gander at the company’s prevailing market capitalization of a whopping $155.6 billion.

While trading at a share price of around $37, Verizon’s stock (NYSE: VZ) has a price-to-earnings (P/E) ratio of 7.28 and the company also dishes out an annual dividend of $2.61 to its shareholders, which is currently yielding nearly 7%.

For a company as dominant in the telecommunications sector as Verizon, we are far from surprised that its initial financials are as stellar as they are.

The company’s share price is apparently undervalued as its price-to-earnings ratio is well below that of fair value, as it is generally accepted that a stock with a P/E of 20 indicates that it is trading at fair value or just about what it is worth paying for, whereas Verizon’s P/E is trading considerably lower than 20 at the moment, hinting that its stock is undervalued.

Investors are also able to enjoy a healthy current annual dividend which, as expected for most companies with the scale and reach of Verizon, is likely to steadily increase over the years to come, especially given that it has raised its dividend over the last sixteen years.

Let’s gain a little more familiarity with this company and its financials, shall we?

Namely, as it relates to the company’s balance sheet, Verizon’s executive team is tasked with handling around $379.6 billion in total assets as well as approximately $288.5 billion in terms of total liabilities. 

Like we said, Verizon is an enormous company.

This is just about the overall aggregate asset and liability breakdown we expected for a company the size of Verizon and therefore, we have pretty much nothing to say about the balance sheet as its total assets outweigh its total liabilities by a more than sufficient margin from our perspective.

Onto the company’s income statement, Verizon’s total revenue over the last five years has been quite consistent, staying bounded between a hair under $128.3 billion (2020) and $136.8 billion (2022).

This tells us two things.

First, this company has verified pricing power, which tends to be a byproduct of being an industry leader, as can be seen through its total revenue jump in 2022, as it likely hiked its prices, knowing many of its core users were still willing (or simply needed to) to keep paying for Verizon’s services.

Second, it also confirms that this company is recession resistant to a large extent, as its total annual revenue range over the past five years has been notably narrow, not experiencing any major or sudden drops during 2020.

All in all, these revenue figures indicate that this company runs a solid business in an essential industry and we obviously have no qualms with that.

When it comes to the company’s cash flow statement, positive net income generation has been far from a flaw for Verizon, as its net income during the same time frame (since 2018) has generally risen from around $16 billion in 2018, to $21.7 billion in 2022, which speaks again to the company’s fortitude during times of economic downturn and distress.

It is also worth briefly noting that the company’s total cash from operations has remained both positive and consistent as well.

Verizon’s stock fundamentals

Candidly, we were hoping that Verizon had a comparably higher trailing twelve month (TTM) net profit margin than that of the industry’s average.

Thankfully, we weren’t disappointed.

Specifically, according to TD Ameritrade’s platform, Verizon’s TTM net profit margin stands at 15.89% to the industry’s average of -2.15%, which to us, is impressive, but at the same rate, more reaffirming in a sense because a company with the clout and extensive global operations as Verizon should naturally post a comparably higher TTM net profit margin.

Nevertheless, this is a great sign.

In addition to the company’s strong TTM net profit margin, Verizon also outpaces the industry’s averages when it comes to its TTM returns on assets and investment which are both around 5% higher than the industry’s averages, given the figures we found on TD Ameritrade’s platform.

Should you buy Verizon stock?

We see Verizon as a certain type of investor’s favorite stock.

For instance, we don’t think it would be reasonable to expect this company’s stock (NYSE: VZ) to double its revenue in the next year or two.

Nothing about this company screams growth.

However, investors employing a more passive, income-oriented strategy will likely love this stock as it provides a steady and strong annual dividend and is an absolute staple in the telecommunications industry, which isn’t going away anytime soon.

Given the predictability of this company’s business and its already more than solid financial base, we think it is most appropriate to give the company’s stock a “buy” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.