Critical Survey: PLDT (NYSE:PHI) and Telefonica Brasil (NYSE:VIV)

Telefonica Brasil (NYSE:VIV) and PLDT (NYSE:PHI) are both communication services companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, dividends, earnings, risk and profitability.

Profitability

This table compares Telefonica Brasil and PLDT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Telefonica Brasil	10.64%	9.72%	5.18%
PLDT	12.81%	26.76%	5.36%

Insider & Institutional Ownership

5.2% of Telefonica Brasil shares are owned by institutional investors. Comparatively, 2.3% of PLDT shares are owned by institutional investors. 0.7% of PLDT shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Telefonica Brasil and PLDT, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Telefonica Brasil	2	6	1	0	1.89
PLDT	0	4	0	0	2.00

Telefonica Brasil currently has a consensus target price of $14.26, suggesting a potential upside of 26.02%. Given Telefonica Brasil’s higher probable upside, equities research analysts plainly believe Telefonica Brasil is more favorable than PLDT.

Dividends

Telefonica Brasil pays an annual dividend of $0.60 per share and has a dividend yield of 5.3%. PLDT pays an annual dividend of $1.09 per share and has a dividend yield of 6.0%. Telefonica Brasil pays out 76.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PLDT pays out 49.1% of its earnings in the form of a dividend. PLDT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Telefonica Brasil and PLDT”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Telefonica Brasil	$10.67 billion	1.73	$1.10 billion	$0.78	14.51
PLDT	$3.80 billion	1.03	$498.72 million	$2.22	8.16

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

Volatility and Risk

Telefonica Brasil has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500. Comparatively, PLDT has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.

Summary

PLDT beats Telefonica Brasil on 9 of the 16 factors compared between the two stocks.

About Telefonica Brasil

Telefônica Brasil S.A., together with its subsidiaries, operates as a mobile telecommunications company in Brazil. Its fixed line services portfolio includes local, domestic long-distance, and international long-distance calls; and mobile portfolio comprises voice and broadband internet access through 3G, 4G, 4.5G, and 5G, as well as mobile value-added and wireless roaming services. The company also offers data services, including broadband and mobile data services. In addition, it provides pay TV services through IPTV technologies; network services, such as rental of facilities; other services comprising internet access, private network connectivity, computer equipment leasing, extended service, caller identification, voice mail, cellular blocker, and others; wholesale services, including interconnection services to users of other network providers; and digital services, such as entertainment, cloud, and security and financial services. Further, the company offers multimedia communication services, which include audio, data, voice and other sounds, images, texts, and other information, as well as sells devices, such as smartphones, broadband USB modems, and other devices. Additionally, it provides telecommunications solutions and IT support to various industries, such as retail, manufacturing, services, financial institutions, government, etc. It markets and sells its solutions through own stores, dealers, retail and distribution channels, door-to-door sales, and outbound tele sales. The company was formerly known as Telecomunicações de São Paulo S.A. – TELESP and changed its name to Telefônica Brasil S.A. in October 2011. The company was incorporated in 1998 and is headquartered in São Paulo, Brazil.

About PLDT

PLDT Inc. provides telecommunications and digital services in the Philippines. The company operates through three segments: Wireless, Fixed Line, and Others. It offers cellular mobile, Internet broadband distribution, operations support, software development, and satellite information and messaging services; and sells Wi-Fi access equipment. The company also provides fixed line telecommunications services; business infrastructure and solutions; intelligent data processing and implementation, and data analytics insight generation services; and information and communications infrastructure for Internet-based services, e-commerce, customer relationship management, and information technology (IT) related services. In addition, it offers managed IT outsourcing, Internet-based purchasing, IT consulting and professional, and bills printing and other related value-added services; distributes Filipino channels and content services; and provides full-services customer rewards and loyalty programs. Further, the company engages in the sale of mobile handsets, broadband data routers, tablets, and accessories; and cross-border digital platforms. Additionally, it provides gaming support services; mobile internet and broadband, and data services; content provider and develops mobile application; IT solution; data and network; domestic leased lines; alternative messaging solutions, such as over-the-top services, social media, and messenger application; inbound roaming and other services; mobile prepaid and postpaid services; and fixed wireless broadband services. The company was formerly known as Philippine Long Distance Telephone Company and changed its name to PLDT Inc. in July 2016. PLDT Inc. was incorporated in 1928 and is headquartered in Makati City, the Philippines.