Cogent Communications (NASDAQ: CCOI) and Frontier Communications (NASDAQ:FTR) are both small-cap telecommunications services companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Insider and Institutional Ownership

95.1% of Cogent Communications shares are owned by institutional investors. Comparatively, 62.9% of Frontier Communications shares are owned by institutional investors. 9.5% of Cogent Communications shares are owned by insiders. Comparatively, 0.9% of Frontier Communications shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Cogent Communications and Frontier Communications, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cogent Communications 5 6 2 0 1.77
Frontier Communications 5 8 1 0 1.71

Cogent Communications presently has a consensus price target of $41.40, suggesting a potential downside of 1.43%. Frontier Communications has a consensus price target of $9.33, suggesting a potential upside of 30.42%. Given Frontier Communications’ higher possible upside, analysts clearly believe Frontier Communications is more favorable than Cogent Communications.

Dividends

Cogent Communications pays an annual dividend of $1.92 per share and has a dividend yield of 4.6%. Frontier Communications pays an annual dividend of $2.40 per share and has a dividend yield of 33.6%. Cogent Communications pays out 548.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Frontier Communications pays out -17.5% of its earnings in the form of a dividend. Frontier Communications is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Cogent Communications has a beta of 0.49, indicating that its share price is 51% less volatile than the S&P 500. Comparatively, Frontier Communications has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500.

Earnings and Valuation

This table compares Cogent Communications and Frontier Communications’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cogent Communications $446.90 million 4.32 $14.92 million $0.35 120.00
Frontier Communications $8.90 billion 0.06 -$373.00 million ($13.75) -0.52

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

Profitability

This table compares Cogent Communications and Frontier Communications’ 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%
Frontier Communications -9.17% -1.97% -0.28%

Summary

Cogent Communications beats Frontier 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 Frontier Communications

Frontier Communications Corporation (Frontier) is a provider of communications services in the United States. The Company offers a portfolio of communications services for residential and business customers. Its products and services include data and Internet services, video services, voice services, access services and customer premise equipment (CPE). The Company offers a range of broadband services. The principal residential service it provides is broadband Internet service. Its commercial services include Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS), Time Division Multiplexing (TDM) data transport services and optical transport services. It also offers wireless broadband services (using unlicensed spectrum) in various markets utilizing networks that it owns or operates. In addition, the Company offers its Frontier Secure suite of products, including computer security, cloud backup and sharing, identity protection and equipment insurance.

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