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13 of the 30 stocks in the Dow Jones Industrials Average are down double-digits year-to-date. One of those companies is Verizon (VZ), down 15.8%.

Based on its 1Q2022 numbers, it had more wireless telecom subscribers than anyone else, at 143 million. But it faces stiff competition from the likes of AT&T (T) and T-Mobile (TMUS). 

And according to our proprietary data, it’s nearly as popular amongst financial pros as AT&T, the telecom bellwether.

With the company’s 5G buildout, is now the time to invest in Verizon?

Verizon’s Business

Verizon Communications (VZ) provides communications, technology, information, and entertainment products and services worldwide to consumers, businesses, and governments. 

VZ was the first company in the world to launch commercial 5G for mobility, fixed wireless, and mobile edge computing. 

The company breaks down its business into two segments: consumer and business groups. 

Its consumer group has 114.6 million wireless retail connections and 91.5 million postpaid connections. This segment contains 7.3 million broadband connections, including 6.6 million Fios Internet connections. 

The business group holds 28.2 million retail connections. 

VZ is the only carrier with mobile edge computing partnerships with all three major cloud providers.

Durin the most recent quarter, the consumer group hit $25.6 billion in revenues, while the business group landed at $7.6 billion.

Financials

The firm’s revenues have been rather stable over the last seven years, not experiencing much growth but not losing ground. 

However, VZ is flush with cash, which it uses to build out its 5G network. 

The firm has a net operating cash flow of $36.,7 billion, which is better than its two biggest competitors, AT&T (T) at $32.7 billion and T-Mobile(TMUS) at $14.5 billion. 

Despite its lack of revenue growth, VZ makes itself attractive to investors by distributing a dividend of $2.56, or a 5.85% yield. 

Valuation

VZ has a P/E GAAP (ttm) of 8.75x, which is significantly better than its 5-year average of 11.73x. The company has a price-to-sales ratio of 1.35x, which is cheaperthan its 5-year average of 1.73x. 

When stacked against its two largest rivals, the results are mixed. For example, it bests T-Mobile with a better P/E GAAP (ttm) 8.75x vs. 10.6x, but not as good as AT&T at 8.06x. 

The same for its price-to-sales ratio. It’s better than T-Mobile, 1.35x vs. 2.27x, but not as good as AT&T at 0.82x. However, AT&T’s financials are a bit skewed since the company recently spun off its entertainment assets to focus exclusively on telecommunications.

VZ has a price-to-cash flow ratio of 4.97x, a vast improvement from its 5-year average of 6.56x.

Profitability

VZ boasts a gross profit margin of 57.3%, which beats AT&T at 53.94%, and almost edges out T-Mobile at 58%. 

Its EBITA margin is competitive, 32.1% vs. AT&T at 33.5%, and T-Mobile at 32.1%. 

However, when you examine its return on equity, it’s superior to its competitors. VZ has a return on equity of 26.2%, AT&T stands at 11.3%, and T-Mobile sits at 2.5%. VZ has a return on total capital of 6.39%, which is better than AT&T at 5.96%, and T-Mobile at 3.71%. 

Growth

We mentioned earlier that growth has been stable for VZ over the last seven years. That said, it is finding pockets of growth in areas of its business. For example, its total wireless service revenue of $18.4 billion last quarter was a 9% increase( YoY).  

Year-over-Year, its revenue growth has sat at 1.1%, which is better than AT&T at -1.91% and slightly lower than T-Mobile at 1.14%. 

While VZ and AT&T offer attractive dividend yields to investors, T-Mobile offers no dividend. VZ’s net income 3-year (CAGR) is 9.51%, which is better than AT&T at 4.66%, and T-Mobile at -19.4%. 

Our Opinion 7/10

Shares of VZ have underperformed compared to its rivals AT&T and T-Mobile year-to-date, down more than 15%. 

AT&T is down 2.87%, and T-Mobile is up 26.8%. 

Furthermore, if you invested in VZ 3 years ago, your return would be -11.8%. 

Let’s face it, VZ is not an exciting company and doesn’t have huge growth prospects. 

However, shares are down, creating an opportunity to buy the dip, and collect an attractive dividend. Historically, its valuation is cheap at these levels, but you could probably find better places to invest your money.