As the telecom industry is a highly competitive industry with numerous players vying for market share and is constantly evolving to meet the changing needs and preferences of consumers, it could be wise to check out fundamentally sound stocks Swisscom AG (SCMWY), PCCW Limited (PCCWY), and VEON Ltd. (VEON).
The telecommunications industry encompasses various technologies and services that enable communication and information exchange among individuals, businesses, and governments.
The industry has been a significant driver of global economic growth and innovation, especially in recent years, with the increasing demand for faster, more reliable, and cost-effective communication solutions. The global telecom market is expected to grow to $3.82 trillion in 2027 at a CAGR of 5.8%.
Additionally, the industry's transition to 5G technology and the increased demand for faster and more reliable connectivity may provide a new growth avenue for the telecom industry. The global 5G services market size is estimated to reach $1.67 trillion by 2030, growing at a CAGR of 52%.
Given the ongoing shift towards 5G technology SCMWY, PCCWY, and VEON seem well-positioned to dodge the strong macroeconomic headwinds on the backs of high profitability. So, investing in these stocks could be wise.
Swisscom AG (SCMWY)
Headquartered in Bern, Switzerland, SCMWY provides telecommunication services through its three segments: Swisscom Switzerland; Fastweb; and Other Operating. It offers mobile and fixed-network services, such as telephony, broadband, TV, and mobile offerings, as well as sells terminal equipment; and telecom and communications solutions for large corporations and small and medium-sized enterprises.
On April 5, SCMWYY was awarded first place in the 2023 CHIP mobile network test, marking the eighth consecutive year the company received this recognition. In addition to being named the overall winner, SCMWY also ranked first in all other categories, including the "best 5G network". Such recognition confirms that SCMWY offers superior network and service quality.
On March 28, at the annual general meeting of SCMWY, the shareholders of the company agreed to all the proposals by the board of directors to set the gross dividend per share at CHF22.
The company’s four-average yield is 4.28%, while its annual dividend of $2.34 translates to a 3.44% yield on the current price level. Its dividend payouts have increased at marginal CAGRs over the past three and five years, respectively.
SCMWY’s net revenue came in at CHF11.11 billion ($12.52 billion) for the fiscal year that ended December 31, 2022. The company’s net income came in at CHF1.60 billion ($1.80 billion), while its operating income and EPS amounted to CHF1.02 billion ($1.15 billion) and CHF30.93, respectively.
In addition, its total current liabilities declined marginally year-over-year to CHF4.31 billion ($4.86 billion), compared to CHF4.34 billion ($4.89 billion) as of December 31, 2021.
In terms of trailing-12-month, SCMWY’s net income margin and ROCE of 14.42% and 14.58% are 326.1% and 396.5% higher than the 3.38% and 2.94% industry averages. Also, its trailing-12-month EBITDA margin of 34.56% compares with the industry average of 17.89%.
Street expects SCMWY’s revenue for the first quarter (ended March 31, 2023) to increase 8.8% year-over-year to $3.10 billion. For the fiscal year 2023, its EPS and revenue are expected to reach $3.73 and $12.50 billion, indicating an 11% and 3.8% year-over-year increase, respectively.
Also, SCMWY’s EBIT and EBITDA grew at CAGRs of 4.2% and 2.1% over the past three years, respectively. Likewise, its total assets have grown at a CAGR of 0.5% in the same period.
Over the past six months, the stock has gained 50.6% to close the last trading session at $68.18.
SCMWY POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Stability and a B for Quality. In the 46-stock A-rated Telecom – Foreign industry, it is ranked #20. To see additional POWR Ratings for SCMWY for Growth, Value, Momentum, and Sentiment, click here.
PCCW Limited (PCCWY)
Based in Quarry Bay, Hong Kong, PCCWY is an investment holding company that engages in the provision of telecommunications and related services. It operates through the following segments: HKT, Media Business; Solutions Business; Pacific Century Premium Development Limited (PCPD); and Other Businesses.
PCCWY’s four-year average dividend yield is 8.58%, while its annual dividend translates to a 14.17% yield on prevailing prices. Its dividend payment has grown at a CAGR of 6% over the past three years. Also, the company has a record of nine years of consecutive dividend growth.
PCCWY’s revenue increased 1.7% year-over-year to HK$36.06 billion ($4.59 billion) for the fiscal year that ended December 31, 2022, while its income from continued operations and profit for the year amounted to HK$1.93 billion ($245.50 million) and HK$2.76 billion ($351.76 million), respectively.
In terms of the trailing-12-month levered FCF margin, the stock’s 10.15% is 39.1% higher than the 7.30% industry average. Likewise, its trailing-12-month EBIT margin and ROTC of 12.90% and 4.50% are 58.5% and 27.1% higher than the industry averages of 8.14% and 3.54%, respectively.
Analysts expect PCCWY’s revenue for the fiscal year ending December 31, 2023, to increase 4.6% year-over-year to $4.81 billion. The stock has gained 22.5% over the past six months to close the last trading session at $5.12.
PCCWY’s solid prospects are reflected in its POWR Ratings. It also has an A for Stability and a B for Sentiment. Within the same A-rated industry, it is ranked #21 of 46 stocks.
In addition to the POWR Ratings we stated above, we also have PCCWY’s ratings for Growth, Value, Momentum, and Quality. Get all PCCWY ratings here.
VEON Ltd. (VEON)
Headquartered in Amsterdam, the Netherlands, VEON is a communications and technology company that provides mobile and fixed-line telecommunications services through a range of traditional and broadband mobile and fixed-line technologies. The company provides its services under the Beeline, Kyivstar, banglalink, and Jazz brands.
On April 20, VEON announced that Beeline Kyrgyzstan, its operating company in Kyrgyzstan, had achieved ISO/IEC 27001:2013 certification, a global standard of compliance for information security management systems.
CEO of Beeline Kyrgyzstan, Andrey Pyatakhin, expressed his pride over this significant achievement, which reflects the company’s dedication to protecting data assets and improving information security processes, enabling it to provide the highest level of security for client data.
On March 1, VEON partnered with OneWeb, the Low Earth Orbit (LEO) satellite communications company, to provide extended mobile internet connectivity and digital services in emerging markets.
This partnership should further support VEON’s “4G for all” and “humanitarian connectivity” focus, which has seen VEON’s operating companies significantly increase their 4G coverage over the past two years, bridge the digital divide for millions of users, respond to disasters and unlock economic growth in their markets.
VEON’s total revenue came in at $940 million for the fourth quarter that ended on December 31, 2022. Its EBITDA increased 1.1% from the year-ago value to $453 million, while its operating profit amounted to $246 million for the same period. In addition, its cash and cash equivalent increased 37.9% year-over-year and amounted to $3.11 billion for the fiscal year that ended on December 31, 2022.
VEON’s trailing-12-month net income margin of 5.57% is 64.5% higher than the 3.38% industry average. Likewise, its trailing-12-month ROCE and ROTA of 37.50% and 2.48% compare with the industry averages of 2.94% and 1.32%, respectively.
VEON’s shares have gained 152.5% over the past six months and 59.8% year-to-date to close the last trading session at $19.57.
VEON’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Quality. In the same industry, it is ranked #first out of 46 stocks. Click here to see the other ratings of VEON for Growth, Momentum, Stability, and Sentiment.
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SCMWY shares were trading at $67.88 per share on Tuesday afternoon, down $0.30 (-0.44%). Year-to-date, SCMWY has gained 27.48%, versus a 6.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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