Analysts rate Telefónica S.A. (TEF:NYE) with an Underperform rating

STA Research
by: STA Research

Based on the Telefónica S.A. stock forecasts from 5 analysts, the average analyst target price for Telefónica S.A. is USD 4.45 over the next 12 months. Telefónica S.A.’s average analyst rating is Under-perform. Stock Target Advisor’s own stock analysis of Telefónica S.A. is Neutral, which is based on 7 positive signals and 7 negative signals. At the last closing, Telefónica S.A.’s stock price was USD 4.92. Telefónica S.A.’s stock price has changed by -0.01% over the past week, -0.44% over the past month and -1.01% over the last year.

Yesterday Morgan Stanley raised the target price on Telefónica S.A. to $5.20 from $4.80, and maintained the Equal Weight rating on the company’s stock.

Telefónica, S.A. provides telecom services throughout Europe and Latin America. Mobile voice, value-added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, trunking and paging services are offered. The company was incorporated in 1924 and is headquartered in Madrid, Spain.

 

What we like:

Superior total returns

The stock has outperformed its sector peers on average annual total returns basis in the past 5 years (for a hold period of at least 12 months) and is in the top quartile.

Underpriced compared to earnings

The stock is trading low compared to its peers on a price to earning basis and is in the top quartile. It may be underpriced but do check its financial performance to make sure there is no specific reason.

Superior return on equity

The company management has delivered better return on equity in the most recent 4 quarters than its peers, placing it in the top quartile.

Superior capital utilization

The company management has delivered better return on invested capital in the most recent 4 quarters than its peers, placing it in the top quartile.

Positive cash flow

The company had positive total cash flow in the most recent four quarters.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

Superior Earnings Growth

This stock has shown top quartile earnings growth in the previous 5 years compared to its sector.

 

What we don’t like:

Poor risk-adjusted returns

This company is delivering below median risk-adjusted returns to its peers. Even if it is outperforming on returns, the returns are unpredictable. Proceed with caution.

Below median dividend returns

The company’s average income yield over the past 5 years has been low compared to its peers. However, it is not a problem if you are not looking for income.

Overpriced on a cash flow basis

The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering buying.

Poor return on assets

The company management has delivered below median return on assets in the most recent 4 quarters compared to its peers.

Highly leveraged

The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and management statements. Sometimes this is high because the company is trying to grow aggressively.

Low Revenue Growth

This stock has shown below median revenue growth in the previous 5 years compared to its sector

Low Dividend Growth

This stock has shown below median dividend growth in the previous 5 years compared to its sector.

 

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