The shares of T-Mobile U.S. (NASDAQ: TMUS) currently trade at $116 per share, which is 47% above its pre-Covid level. On the other hand, shares of Verizon (NYSE: VZ) are trading at $53 per share, which is, in fact, 12% below its pre-Covid level. Does that make VZ a better stock pick compared to TMUS? Both companies belong to the telecom sector. Verizon is a bigger company, with its market cap and revenue base being significantly larger than T-Mobile’s. However, T-Mobile has demonstrated a much superior revenue growth over recent years. In fact, its deal with Sprint Corp and other associations (with Brookings Municipal Utilities) in the pipeline will ensure that it continues to grow at a much better rate compared to Verizon. Also, a far wider 5G coverage compared to its peers has helped TMUS command a much better valuation multiple (P/E) compared to Verizon. We compare a slew of factors such as historical revenue growth, returns, and valuation multiple in an interactive dashboard analysis, T-Mobile US vs Verizon: Industry Peers; Which Stock Is A Better Bet?
- T-Mobile revenues have demonstrated better growth compared to Verizon over recent years, with TMUS revenues expanding 26.5% over the last three years. On the other hand, Verizon revenues increased by less than 4% during this period. If you look at the last twelve months (LTM) period, TMUS recorded 71% revenue growth while Verizon’s revenue growth lagged significantly just at 2.4%. T-Mobile’s top line benefited from the merger with Sprint Corp and growth in post-paid revenues.
- Both T-Mobile and Verizon, generate revenues from wireless postpaid and prepaid plans.
- Verizon’s operating profit margins have historically been higher than T-Mobile’s. If you look at the last three years, VZ’s margins increased by 5.5% while TMUS’ margins fell by 2.1%.
- Also, VZ’s LTM profit margins stood at 23%, much above TMUS’ 9.8%.
- T-Mobile’s profitability was adversely affected due to merger-related expenses after the deal with Sprint Corp. (related: check out our theme on 5G Stocks).
- With respect to debt, T-Mobile has a far higher leverage. Debt as a percentage of equity stands at 45% for TMUS, much higher compared to 3% in the case of Verizon.
- Also, Verizon has better liquidity, with cash as a percentage of total assets standing at 7% vis-à-vis 3.3% for TMUS.
Net of it all
Despite Verizon having a much larger revenue base (in absolute terms), higher margins, and better balance sheet position, T-Mobile has demonstrated much better top line growth over recent years. Its inorganic growth strategy and rapid 5G expansion have rewarded the company’s stock in the form of much better market returns. TMUS stock return stood at 84% over the last three years as against 1.2% for VZ stock. T-Mobile is expected to continue on its healthy growth trajectory with another $14 billion revenue addition expected during the next two years. The deal with Sprint is helping T-Mobile register healthy subscriber growth, while also providing the company access to Sprint’s key radio frequency assets which, when combined with T-Mobile’s, will give it industry-leading 5G technology. T-Mobile’s 5G network already covers 1.6 million square miles of the U.S., more than double its next closest competitor, AT&T. T-Mobile plans to extend that network to smaller markets and rural areas, thus aiming to raise that share close to 20% in the next five years, from its level of share which is in the low teens currently.
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