Critical Analysis: TELUS (NYSE:TU) versus Swisscom (OTCMKTS:SCMWY)

Swisscom (OTCMKTS:SCMWY) and TELUS (NYSE:TU) are both large-cap utilities companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, profitability, dividends, earnings and analyst recommendations.

Volatility & Risk

Swisscom has a beta of 0.26, suggesting that its stock price is 74% less volatile than the S&P 500. Comparatively, TELUS has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500.

Dividends

Swisscom pays an annual dividend of $1.61 per share and has a dividend yield of 2.3%. TELUS pays an annual dividend of $1.19 per share and has a dividend yield of 9.3%. Swisscom pays out 56.5% of its earnings in the form of a dividend. TELUS pays out 216.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TELUS has raised its dividend for 5 consecutive years. TELUS is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Swisscom and TELUS”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Swisscom	$12.54 billion	28.83	$1.75 billion	$2.85	24.48
TELUS	$20.45 billion	0.97	$724.69 million	$0.55	23.28

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

Institutional & Insider Ownership

49.4% of TELUS shares are owned by institutional investors. 1.0% of Swisscom shares are owned by company insiders. Comparatively, 0.1% of TELUS shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Swisscom and TELUS’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Swisscom	8.87%	10.34%	3.42%
TELUS	5.71%	8.76%	2.50%

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Swisscom and TELUS, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Swisscom	1	2	1	0	2.00
TELUS	1	6	5	1	2.46

TELUS has a consensus price target of $18.17, suggesting a potential upside of 41.87%. Given TELUS’s stronger consensus rating and higher probable upside, analysts clearly believe TELUS is more favorable than Swisscom.

About Swisscom

Swisscom AG provides telecommunication services primarily in Switzerland, Italy, and internationally. It operates through three segments: Swisscom Switzerland, Fastweb, and Other Operating. The company offers mobile and fixed-network services, such as telephony, TV, broadband, and mobile offerings, as well as sells terminal equipment; and telecom and communications solutions for large corporations and small and medium-sized enterprises. It also provides cloud, outsourcing, workplace, mobile phone, networking, business process optimization, SAP, and security and authentication solutions, as well as a range of services to the banking industry; Internet of Things solutions; digitization services to the healthcare sector; IT systems for health insurance companies; fixed-line and mobile networks by other telecommunication service providers; and roaming to foreign operators whose customers use its mobile networks, as well as broadband services and regulated products. In addition, the company plans, operates, and maintains network infrastructure and IT systems; provides support functions to finance, human resource, and strategy, as well as management of real estate and vehicle fleet; and offers broadband and mobile services, such as telephony, mobile offerings, and broadband services, as well as ICT solutions for residential, business, and wholesale customers. Further, it provides IT and network services; online and telephone directories; and cross-platform retail media and security communication services, as well as builds and maintains wired and wireless networks. The company was founded in 1998 and is based in Bern, Switzerland.

About TELUS

TELUS Corporation, together with its subsidiaries, provides a range of telecommunications and information technology products and services in Canada. It operates through Technology Solutions and Digitally-Led Customer Experiences segments. The Technology Solutions segment offers a range of telecommunications products and services; network services; healthcare services; mobile technologies equipment; data services, such as internet protocol; television; hosting, managed information technology, and cloud-based services; software, data management, and data analytics-driven smart food-chain and consumer goods technologies; home and business security; healthcare software and technology solutions; and voice and other telecommunications services, as well as mobile and fixed voice and data telecommunications services and products. The Digitally-Led Customer Experiences segment provides digital customer experience and digital-enablement transformation solutions, including artificial intelligence and content management solutions. The company was formerly known as TELUS Communications Inc. and changed its name to TELUS Corporation in February 2005. TELUS Corporation was incorporated in 1998 and is based in Vancouver, Canada.