Analyzing Cogent Communications (NASDAQ:CCOI) & Centurylink (CTL)

Cogent Communications (NASDAQ: CCOI) and Centurylink (NYSE:CTL) are both mid-cap computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, institutional ownership, risk and earnings.

Analyst Ratings

This is a summary of current ratings and recommmendations for Cogent Communications and Centurylink, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cogent Communications 5 6 2 0 1.77
Centurylink 1 8 4 0 2.23

Cogent Communications presently has a consensus target price of $41.40, suggesting a potential downside of 8.61%. Centurylink has a consensus target price of $22.00, suggesting a potential upside of 26.73%. Given Centurylink’s stronger consensus rating and higher probable upside, analysts plainly believe Centurylink is more favorable than Cogent Communications.

Dividends

Cogent Communications pays an annual dividend of $1.92 per share and has a dividend yield of 4.2%. Centurylink pays an annual dividend of $2.16 per share and has a dividend yield of 12.4%. 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. Centurylink pays out 372.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Centurylink is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Cogent Communications has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500. Comparatively, Centurylink has a beta of 0.79, meaning that its share price is 21% less volatile than the S&P 500.

Profitability

This table compares Cogent Communications and Centurylink’s 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%
Centurylink 1.89% 7.99% 2.16%

Institutional and Insider Ownership

95.5% of Cogent Communications shares are owned by institutional investors. Comparatively, 82.3% of Centurylink shares are owned by institutional investors. 9.5% of Cogent Communications shares are owned by company insiders. Comparatively, 0.6% of Centurylink shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Cogent Communications and Centurylink’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cogent Communications $446.90 million 4.66 $14.92 million $0.36 125.83
Centurylink $17.47 billion 1.06 $626.00 million $0.58 29.93

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

Summary

Centurylink beats Cogent Communications on 10 of the 16 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 Centurylink

CenturyLink, Inc. is an integrated communications company. The Company is engaged in providing an array of communications services to its residential and business customers. Its segments include business, which provides strategic, legacy and data integration products and services to small, medium and enterprise business, wholesale and governmental customers, including other communication providers, and consumer, which provides strategic and legacy products and services to residential customers. Its communications services include local and long-distance voice, broadband, Multi-Protocol Label Switching (MPLS), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), data integration, video, network, public access, Voice over Internet Protocol (VoIP), information technology and other ancillary services. As of December 31, 2016, it served approximately 5.9 million broadband subscribers and 325,000 Prism TV subscribers.

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