Head-To-Head Analysis: Telefonica (NYSE:TEF) versus Deutsche Telekom (OTCMKTS:DTEGY)

Telefonica (NYSE:TEF) and Deutsche Telekom (OTCMKTS:DTEGY) are both large-cap utilities companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, dividends, profitability, valuation and risk.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Telefonica and Deutsche Telekom, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Telefonica	5	4	0	0	1.44
Deutsche Telekom	1	0	2	0	2.33

Telefonica currently has a consensus price target of $4.02, suggesting a potential upside of 5.38%. Given Telefonica’s higher possible upside, equities research analysts clearly believe Telefonica is more favorable than Deutsche Telekom.

Volatility and Risk

Telefonica has a beta of 0.29, indicating that its stock price is 71% less volatile than the S&P 500. Comparatively, Deutsche Telekom has a beta of 0.4, indicating that its stock price is 60% less volatile than the S&P 500.

Earnings & Valuation

This table compares Telefonica and Deutsche Telekom”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Telefonica	$40.55 billion	0.53	-$53.02 million	($0.41)	-9.29
Deutsche Telekom	$134.70 billion	1.33	$10.87 billion	$2.21	16.48

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

Dividends

Telefonica pays an annual dividend of $0.25 per share and has a dividend yield of 6.6%. Deutsche Telekom pays an annual dividend of $1.88 per share and has a dividend yield of 5.2%. Telefonica pays out -61.0% of its earnings in the form of a dividend. Deutsche Telekom pays out 85.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Telefonica is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Telefonica and Deutsche Telekom’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Telefonica	-5.23%	8.54%	1.96%
Deutsche Telekom	8.03%	10.53%	3.37%

Insider & Institutional Ownership

1.1% of Telefonica shares are held by institutional investors. 0.0% of Telefonica shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Deutsche Telekom beats Telefonica on 11 of the 16 factors compared between the two stocks.

About Telefonica

Telefónica, S.A., together with its subsidiaries, provides telecommunications services in Europe and Latin America. The company offers mobile and related services and products, such as mobile voice, value added, mobile data and internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. It also provides fixed telecommunication services, including PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary value-added services; video telephony; intelligent network; and telephony information services, as well as leases and sells handset equipment and telephony information services. It also provides Internet and broadband multimedia services comprising internet service provider, portal and network, retail and wholesale broadband access, narrowband switched access, security, internet through fibre to the home, and voice over internet protocol services. In addition, the company offers leased line, virtual private network, fibre optics, web hosting and application, managed hosting, content delivery, outsourcing and application, desktop, and system integration and professional services. Further, the company offers wholesale services for telecommunication operators, including domestic interconnection and international wholesale services; leased lines for other operators; and local loop leasing services, as well as bit stream services, wholesale line rental accesses, and leased ducts for other operators' fiber deployment. Additionally, it provides video/TV services; smart connectivity and services, and consumer IoT products; financial and other payment, security, cloud, advertising, big data, and digital experience services; Aura; open gateway, living apps; smart Wi-Fi, Phoenix, NT, Solar 360, and Movistar Home devices. Telefónica, S.A. was incorporated in 1924 and is headquartered in Madrid, Spain.

About Deutsche Telekom

Deutsche Telekom AG, together with its subsidiaries, provides integrated telecommunication services. The company operates through Germany, United States, Europe, Systems Solutions, Group Development, and Group Headquarters and Group Services segments. It offers fixed-network services, including voice and data communication services based on fixed-network and broadband technology; and sells terminal equipment and other hardware products, as well as services to resellers. In addition, the company provides mobile voice and data services to consumers and business customers; sells mobile devices and other hardware products; and sells mobile services to resellers and to companies that purchases and markets network services to third parties, such as mobile virtual network operators. Further, it offers internet services; internet-based TV products and services; and information and communication technology systems for multinational corporations and public sector institutions with an infrastructure of data centers and network services. Additionally, the company provides wireless communications services; and cloud services, digital solutions, security, and advisory solutions. Deutsche Telekom AG has mobile customers and broadband customers, as well as fixed-network lines. The company was incorporated in 1995 and is headquartered in Bonn, Germany.