Level 3 Communications (NYSE: LVLT) and Verizon Communications (NYSE:VZ) are both large-cap computer and technology companies, but which is the better business? We will contrast the two companies based on the strength of their profitabiliy, institutional ownership, analyst recommendations, risk, dividends, earnings and valuation.

Earnings and Valuation

This table compares Level 3 Communications and Verizon Communications’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Level 3 Communications $8.17 billion 2.56 $2.66 billion $1.75 33.02
Verizon Communications $123.62 billion 1.44 $42.69 billion $3.00 14.57

Verizon Communications has higher revenue and earnings than Level 3 Communications. Verizon Communications is trading at a lower price-to-earnings ratio than Level 3 Communications, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

62.6% of Verizon Communications shares are owned by institutional investors. 0.5% of Level 3 Communications shares are owned by company insiders. Comparatively, 0.1% of Verizon Communications shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

Level 3 Communications has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500. Comparatively, Verizon Communications has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500.

Profitability

This table compares Level 3 Communications and Verizon Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Level 3 Communications 7.80% 6.23% 2.71%
Verizon Communications 9.92% 66.99% 6.39%

Analyst Ratings

This is a breakdown of recent ratings and target prices for Level 3 Communications and Verizon Communications, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Level 3 Communications 1 11 2 0 2.07
Verizon Communications 0 23 5 0 2.18

Level 3 Communications presently has a consensus price target of $60.41, suggesting a potential upside of 4.55%. Verizon Communications has a consensus price target of $53.39, suggesting a potential upside of 22.15%. Given Verizon Communications’ stronger consensus rating and higher probable upside, analysts plainly believe Verizon Communications is more favorable than Level 3 Communications.

Dividends

Verizon Communications pays an annual dividend of $2.31 per share and has a dividend yield of 5.3%. Level 3 Communications does not pay a dividend. Verizon Communications pays out 77.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Verizon Communications has raised its dividend for 10 consecutive years.

Summary

Verizon Communications beats Level 3 Communications on 12 of the 17 factors compared between the two stocks.

About Level 3 Communications

Level 3 Communications, Inc. is a provider of a range of integrated communications services. The Company’s operating segments include North America, EMEA and Latin America. The North America includes operations in Atlanta, Georgia; Littleton, Colorado; Miami, Florida; Montreal, Canada; New York, New York; Phoenix, Arizona; Pittsburgh, Pennsylvania; Southfield, Michigan, and Tulsa, Oklahoma. The Europe segment includes operations in Basingstoke, England; Crewe, England; Dublin, Ireland; London, England; Amsterdam, The Netherlands, and Paris, France. The Latin America includes operations in Colombia; Buenos Aires, Argentina; Caracas, Venezuela; Lima, Peru; Quito, Ecuador; Santiago, Chile, and Sao Paulo, Brazil. It offers optical, Internet Protocol, computing and storage technologies. It offers a range of communications services, including Internet Protocol (IP) and data services, transport and fiber services, colocation and data center services, security services and voice services.

About Verizon Communications

Verizon Communications Inc. is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data and video communications products and services, such as broadband video, data center and cloud services, security and managed network services, and local and long distance voice services. The Company has combined Yahoo! Inc.’s operating assets with its existing AOL Inc. business to create a new subsidiary, Oath Inc., owns a diverse house of more than 50 media and technology brands. The Oath portfolio includes HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, Yahoo Finance and Yahoo Mail.

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