Head to Head Contrast: Cogent Communications (CCOI) & FairPoint Communications (FRP)

Cogent Communications (NASDAQ: CCOI) and FairPoint Communications (NASDAQ:FRP) are both computer and technology companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, profitability, risk, earnings, institutional ownership, analyst recommendations and dividends.

Insider and Institutional Ownership

95.6% of Cogent Communications shares are owned by institutional investors. Comparatively, 88.6% of FairPoint Communications shares are owned by institutional investors. 9.5% of Cogent Communications shares are owned by company insiders. Comparatively, 7.6% of FairPoint Communications shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cogent Communications $446.90 million 4.82 $14.92 million $0.36 130.14
FairPoint Communications N/A N/A N/A $2.27 7.03

Cogent Communications has higher revenue and earnings than FairPoint Communications. FairPoint 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Cogent Communications 3.37% -23.86% 2.18%
FairPoint Communications -11.81% N/A -7.88%

Dividends

Cogent Communications pays an annual dividend of $1.92 per share and has a dividend yield of 4.1%. FairPoint Communications does not pay 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.

Volatility and Risk

Cogent Communications has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500. Comparatively, FairPoint Communications has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for Cogent Communications and FairPoint Communications, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cogent Communications 5 6 4 0 1.93
FairPoint Communications 0 1 0 0 2.00

Cogent Communications presently has a consensus price target of $42.67, indicating a potential downside of 8.93%. FairPoint Communications has a consensus price target of $17.00, indicating a potential upside of 6.58%. Given FairPoint Communications’ stronger consensus rating and higher possible upside, analysts clearly believe FairPoint Communications is more favorable than Cogent Communications.

Summary

Cogent Communications beats FairPoint Communications on 7 of the 12 factors compared between the two stocks.

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.

About FairPoint Communications

FairPoint Communications, Inc. is a provider of data, voice and communications services to business, wholesale and residential customers within its service territories. The Company offers its customers a suite of services, such as Ethernet, Session Initiation Protocol Trunking (SIP-Trunking), hosted Primary Branch Exchange (hosted PBX), managed services, data center colocation services, high capacity data transport and other Internet protocol (IP)-based services over its fiber-based network. It also offers Internet access, high-speed data, and local and long distance voice services. It provides services, such as Data and Internet Services, which include optical, Ethernet, Ethernet virtual circuit technology for cellular backhaul and private line special access services. It offers Voice Services, which include Local Calling Services, Long Distance Services and 9-1-1 Services. It also offers Network Transport Services, Interstate Access Charges and Intrastate Access Charges.

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