Reviewing Telephone & Data Systems (TDS) & Sprint (S)

Telephone & Data Systems (NYSE: TDS) and Sprint (NYSE:S) are both mid-cap utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, valuation, institutional ownership, earnings and dividends.

Risk & Volatility

Telephone & Data Systems has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, Sprint has a beta of 0.79, meaning that its stock price is 21% less volatile than the S&P 500.

Dividends

Telephone & Data Systems pays an annual dividend of $0.62 per share and has a dividend yield of 2.3%. Sprint does not pay a dividend. Telephone & Data Systems pays out -48.8% of its earnings in the form of a dividend. Telephone & Data Systems has raised its dividend for 43 consecutive years.

Profitability

This table compares Telephone & Data Systems and Sprint’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telephone & Data Systems -2.77% 1.08% 0.55%
Sprint -1.82% -3.19% -0.73%

Earnings & Valuation

This table compares Telephone & Data Systems and Sprint’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telephone & Data Systems $5.10 billion 0.59 $43.00 million ($1.27) -21.39
Sprint $33.35 billion 0.68 -$1.21 billion ($0.15) -37.93

Telephone & Data Systems has higher earnings, but lower revenue than Sprint. Sprint is trading at a lower price-to-earnings ratio than Telephone & Data Systems, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

83.8% of Telephone & Data Systems shares are owned by institutional investors. Comparatively, 13.7% of Sprint shares are owned by institutional investors. 17.3% of Telephone & Data Systems shares are owned by company insiders. Comparatively, 0.2% of Sprint shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings for Telephone & Data Systems and Sprint, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telephone & Data Systems 0 1 1 0 2.50
Sprint 4 11 1 0 1.81

Sprint has a consensus price target of $6.55, indicating a potential upside of 15.03%. Given Sprint’s higher probable upside, analysts clearly believe Sprint is more favorable than Telephone & Data Systems.

Summary

Telephone & Data Systems beats Sprint on 11 of the 16 factors compared between the two stocks.

About Telephone & Data Systems

Telephone and Data Systems, Inc. is a diversified telecommunications company. The Company is engaged in conducting its Wireless operations through its subsidiary, United States Cellular Corporation (U.S. Cellular), as well as providing its wireline services, cable services, and hosted and managed services (HMS), through its subsidiary, TDS Telecommunications Corporation (TDS Telecom). It operates through four business segments: U.S. Cellular, Wireline, Cable, and Hosted and Managed Services. U.S. Cellular provides service to postpaid and prepaid customers. Wireline operations provide retail telecommunications services to both residential and commercial customers. Wireline offers services, including broadband, video, voice and network access services. Cable offers broadband, video and voice services under TDS and BendBroadband brand names. It provides a range of information technology (IT) services, including colocation, and cloud and hosting solutions through its HMS business.

About Sprint

Sprint Corporation (Sprint) is a holding company. The Company, along with its subsidiaries, is a communications company offering a range of wireless and wireline communications products and services that are designed to meet the needs of consumers, businesses, government subscribers and resellers. It operates through two segments: Wireless and Wireline. The Company offers wireless services on a postpaid and prepaid payment basis to retail subscribers and also on a wholesale basis. The Wireline segment provides voice, data and Internet Protocol (IP) communication services to its Wireless segment. The Company offers wireless and wireline services to subscribers in approximately 50 states, Puerto Rico, and the United States Virgin Islands under the Sprint corporate brand, which includes its retail brands of Sprint, Boost Mobile, Virgin Mobile and Assurance Wireless on its wireless networks utilizing various technologies.

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