Critical Review: BT Group (BT) versus Telephone & Data Systems (TDS)

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Telephone & Data Systems (NYSE: BT) and BT Group (NYSE:BT) are both utilities companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Earnings & Valuation

This table compares Telephone & Data Systems and BT Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Telephone & Data Systems $5.04 billion 0.68 $153.00 million $0.53 58.13
BT Group $31.46 billion 0.94 $2.70 billion $1.85 8.06

BT Group has higher revenue and earnings than Telephone & Data Systems. BT Group is trading at a lower price-to-earnings ratio than Telephone & Data Systems, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

81.7% of Telephone & Data Systems shares are held by institutional investors. Comparatively, 0.8% of BT Group shares are held by institutional investors. 17.3% of Telephone & Data Systems shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Telephone & Data Systems pays an annual dividend of $0.64 per share and has a dividend yield of 2.1%. BT Group pays an annual dividend of $1.31 per share and has a dividend yield of 8.8%. Telephone & Data Systems pays out 120.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. BT Group pays out 70.8% of its earnings in the form of a dividend. Telephone & Data Systems has raised its dividend for 43 consecutive years and BT Group has raised its dividend for 6 consecutive years. BT Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Telephone & Data Systems and BT Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Telephone & Data Systems 3.53% 1.98% 1.05%
BT Group 8.64% 32.72% 6.43%

Analyst Ratings

This is a summary of current ratings and price targets for Telephone & Data Systems and BT Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Telephone & Data Systems 1 0 3 0 2.50
BT Group 0 10 5 0 2.33

Telephone & Data Systems presently has a consensus target price of $36.50, indicating a potential upside of 18.47%. BT Group has a consensus target price of $303.57, indicating a potential upside of 1,936.03%. Given BT Group’s higher probable upside, analysts clearly believe BT Group is more favorable than Telephone & Data Systems.

Risk and Volatility

Telephone & Data Systems has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500. Comparatively, BT Group has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500.

Summary

BT Group beats Telephone & Data Systems on 12 of the 17 factors compared between the two stocks.

Telephone & Data Systems Company Profile

Telephone and Data Systems, Inc., a telecommunications company, provides wireless, wireline, cable, and hosted and managed services in the United States. The company offers cellular services, such as postpaid national plans and prepaid service plans with voice, messaging, and data usage options; and business rate plans. It also offers wireless devices comprising handsets, tablets, mobile hotspots, home phones, and routers; and including accessories, including wireless basics, such as cases, screen protectors, chargers, and memory cards, as well as an assortment of consumer electronics comprising headphones, speakers, wearables, and home automation products. In addition, the company provides wireline and cable broadband services; digital television (TV) and digital satellite TV video services; voice services comprising local and long-distance telephone, voice over Internet protocol, find me follow me, collaboration, instant messaging, and other services; and network access services. Further, it offers a range of information technology (IT) services, including colocation, cloud and hosting solutions, managed services, and enterprise resource planning application management services; sells IT hardware, as well as provides related maintenance and professional services; and engages in planning, engineering, procurement, sale, installation, and management of IT-infrastructure solutions. Additionally, the company operates retail stores and kiosks. The company serves approximately 5.1 million wireless customers and 1.2 million wireline and cable customers. Telephone and Data Systems, Inc. sells its products through retail sales, direct sales, third-party retailers, and independent agents, as well as through Website and telesales. The company was founded in 1968 and is headquartered in Chicago, Illinois.

BT Group Company Profile

BT Group Plc provides communication solutions and services. Its principal activities include fixed-lines services, broadband, mobile and TV products and services as well as networked IT services. The company has following customer-facing lines of business: Consumer; Business and Public Sector; Global Services; Wholesale and Ventures; Technology, Service and Operations; and Openreach. The Consumer segment provides consumer fixed-voice, broadband and mobile services. The Business and Public Sector segment offers fixed, mobile, networking and IT services. The Global Services segment provides business communications and supplies ICT services. The Wholesale and Ventures segment provides services for media companies and broadcasters. The Technology, Service and Operations segment creates and operates global networks, platforms and IT systems. The Openreach segment builds and maintains digital infrastructure and provides the foundation for Britain’s booming digital economy against a backdrop of profound changes to its business. BT Group was founded on March 30, 2001 and is headquartered in London, the United Kingdom.

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