Analyzing Telefónica (NYSE:TEF) and TIM (NYSE:TIMB)

Telefónica (NYSE:TEFGet Rating) and TIM (NYSE:TIMBGet Rating) are both utilities companies, but which is the better business? We will compare the two companies based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, earnings, profitability and risk.

Volatility and Risk

Telefónica has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500. Comparatively, TIM has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Telefónica and TIM, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telefónica 1 5 0 0 1.83
TIM 0 0 3 0 3.00

Telefónica currently has a consensus price target of $4.35, indicating a potential downside of 9.00%. TIM has a consensus price target of $16.50, indicating a potential upside of 20.97%. Given TIM’s stronger consensus rating and higher probable upside, analysts clearly believe TIM is more favorable than Telefónica.

Dividends

Telefónica pays an annual dividend of $0.22 per share and has a dividend yield of 4.6%. TIM pays an annual dividend of $0.36 per share and has a dividend yield of 2.6%. Telefónica pays out 12.8% of its earnings in the form of a dividend. TIM pays out 31.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Telefónica is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

6.3% of Telefónica shares are held by institutional investors. Comparatively, 5.0% of TIM shares are held by institutional investors. 0.0% of Telefónica shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Telefónica and TIM’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telefónica $46.47 billion 0.59 $9.63 billion $1.72 2.78
TIM $3.35 billion 1.97 $547.96 million $1.14 11.97

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

Profitability

This table compares Telefónica and TIM’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telefónica 21.20% 9.02% 2.34%
TIM 16.41% 8.98% 4.87%

Summary

Telefónica beats TIM on 9 of the 16 factors compared between the two stocks.

About Telefónica (Get Rating)

Telefónica, S.A., together with its subsidiaries, provides telecommunications services in Europe and Latin America. The company's mobile and related services and products comprise mobile voice, value added, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long-distance and fixed-to-mobile communications; corporate communications; supplementary value-added services; video telephony; intelligent network; and telephony information services, as well as leases and sells handset equipment. The company also provides Internet and broadband multimedia services comprising Internet service provider, portal and network, retail and wholesale broadband access, narrowband switched access, high-speed Internet through fibre to the home, and voice over Internet protocol services. In addition, it offers leased line, virtual private network, fibre optics, web hosting and application, outsourcing and consultancy, desktop, and system integration and professional services. Further, the company offers wholesale services for telecommunication operators, including domestic interconnection and international wholesale services; leased lines for other operators; and local loop leasing services, as well as bit stream services, wholesale line rental accesses, and leased ducts for other operators' fiber deployment. Additionally, it provides video/TV services; smart connectivity and services, and consumer IoT products; financial and other payment, security, cloud computing, advertising, big data, and digital telco experience services; virtual assistants; digital home platforms; and Movistar Home devices. It also offers online telemedicine, home insurance, music streaming, and consumer loan services. The company was incorporated in 1924 and is headquartered in Madrid, Spain.

About TIM (Get Rating)

TIM S.A. operates as a telecommunications company in Brazil. The company provides mobile voice and data services, broadband internet access, value-added services, and other telecommunications services and products. It also offers fixed-line ultra-broadband and TIM Live services, as well as WTTx technology through Ultrafibra services and IoT solutions. In addition, the company provides prepaid and postpaid services; corporate solutions for mobile or fixed services, as well as mobile-to-mobile services; value-added services; financial and other services; digital channels; and customer services. Further, it offers landline switched telephone services, national long-distance and international long-distance voice services, personal mobile services, and multimedia communication services; sells various mobile handsets and accessories through its dealer network, which includes its own stores, exclusive franchises, and authorized dealers; and offers co-billing services to other telecommunication service providers. The company provides its services for individuals, as well as corporate solutions for small, medium, and large companies. As of December 31, 2021, it served a subscriber base of 52.6 million customers; and had approximately 12.8 thousand points of sale, including 158 company owned stores, as well as had approximately 212 thousand points of sales to access prepaid phone services through supermarkets, newsstands, and other small retailers. The company was formerly known as Tele Celular Sul Participações S.A. and changed its name to TIM Participações S.A. in August 2004. The company was incorporated in 1998 and is headquartered in Rio de Janeiro, Brazil. TIM S.A. is a subsidiary of TIM Brasil Serviços e Participações S.A.

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