Head-To-Head Review: Telefonica Brasil (NYSE:VIV) and Deutsche Telekom (OTCMKTS:DTEGY)

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

Risk and Volatility

Deutsche Telekom has a beta of 0.33, meaning that its stock price is 67% less volatile than the S&P 500. Comparatively, Telefonica Brasil has a beta of 0.52, meaning that its stock price is 48% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Deutsche Telekom	7.18%	11.20%	3.51%
Telefonica Brasil	10.64%	9.72%	5.18%

Analyst Ratings

This is a summary of recent recommendations and price targets for Deutsche Telekom and Telefonica Brasil, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Deutsche Telekom	0	4	2	0	2.33
Telefonica Brasil	3	5	1	0	1.78

Telefonica Brasil has a consensus target price of $14.66, suggesting a potential upside of 27.31%. Given Telefonica Brasil’s higher probable upside, analysts plainly believe Telefonica Brasil is more favorable than Deutsche Telekom.

Earnings and Valuation

This table compares Deutsche Telekom and Telefonica Brasil”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Deutsche Telekom	$134.70 billion	1.06	$10.87 billion	$2.07	14.41
Telefonica Brasil	$61.77 billion	0.30	$1.10 billion	$0.78	14.76

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

Institutional & Insider Ownership

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

Dividends

Deutsche Telekom pays an annual dividend of $1.88 per share and has a dividend yield of 6.3%. Telefonica Brasil pays an annual dividend of $0.60 per share and has a dividend yield of 5.2%. Deutsche Telekom pays out 90.8% 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 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.

Summary

Deutsche Telekom beats Telefonica Brasil on 8 of the 15 factors compared between the two stocks.

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.

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.