Verizon Communications Inc (VZ)

Conclusion

Verizon Communications Inc is a US telecom group that sells wireless and fixed wireless broadband, fiber and copper internet, and communication services to businesses through its Consumer and Business segments. At 46.06 USD on 9 November 2026, the shares give a market capitalisation of 190.9 billion USD and an enterprise value of 375.4 billion USD.

The verdict is undervalued. The P/E of 11.6x sits below its ten-year median of 12.3x, the EV/EBITDA of 7.7x below 8.1x, and the P/FCF of 9.0x below 12.8x. The DCF gives 77.35 USD per share at a discount rate of 8.87%. The fair value band runs from 52.26 to 78.40 USD, with a midpoint of 65.33 USD and a margin of safety of 41.8%. The reverse DCF implies growth of -5.3% a year, while revenue grew 1.5% a year over five years and free cash flow per share fell 2.1% a year over the same period.

What holds the case up: free cash flow conversion of 128.6% over the last twelve months, a Beneish M-score of -2.65 that points to an unlikely manipulation, and an ROIC of 7.9% against a WACC of 6.3%. What would break it: a current ratio of 0.63, an Altman Z-score of 1.21 in the distress zone, and net debt to EBITDA of 3.8x.

Financial health

Financial strength is red, held down by weak liquidity and the Altman Z-score, while leverage and interest coverage are only neutral. The current ratio is 0.63 and the quick ratio 0.47, both below one. Net debt to EBITDA is 3.77x, debt to equity 1.78 and interest coverage 3.85x on a trailing basis. The Altman Z-score of 1.21 falls in the distress zone, but that model was designed for manufacturers and Verizon is a telecom operator, so the reading needs care. Insolvency risk is low, about 0.6% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is green, supported by strong cash conversion and a low Beneish reading. Free cash flow conversion is 128.6% on a trailing basis and 97.0% on a five-year average. The accrual ratio is -5.1%. The share count has risen at only 0.4% a year over five years, so buybacks have not offset dilution. The Piotroski score is 4 of 9. The company's stock-based compensation is not available, so its weight in the accounts cannot be shown. Verizon beat estimates in 7 of the last 8 quarters, with an average surprise of 2.7%. Estimate revisions are negative: in the last 30 days, 8 analysts cut the current-year estimate and 4 raised it, and 6 cut the next-year estimate against 4 raises.

Profitability

Profitability is green. The gross margin of 59.1% is above its ten-year median of 45.8%, while the operating margin of 20.9% is slightly below its median of 22.5%, and the net margin of 11.8% is below 13.4%. Operating margin has been stable, with a five-year variability of 4.9%. The key number is ROIC of 7.9% against a WACC of 6.3%, a neutral ROIC minus WACC of 1.5%, and a five-year median ROIC of 8.7%. ROE of 15.5% is flattered by leverage. The DuPont split for 2025 shows a net margin of 12.4%, an asset turnover of 0.34x and an equity multiplier of 3.87x.

Growth

Growth is yellow. Revenue has grown at a compound rate of 0.3% over three years, 1.5% over five years and 0.5% over ten years, and it rose in 7 of the last 10 years. Earnings per share have fallen at -7.1% a year over three years, -1.1% over five years and -0.7% over ten years. Free cash flow per share grew 23.4% a year over three years but fell 2.1% over five years and 1.1% over ten years. Analysts expect earnings per share to grow about 5.0% next year.

Valuation

Valuation is green. Today's P/E of 11.6x is 5.3% below its ten-year median of 12.3x, the EV/EBITDA of 7.7x is 4.8% below 8.1x, the P/FCF of 9.0x is 29.1% below 12.8x, the P/S of 1.37x is 13.6% below 1.59x and the P/B of 1.80x is 41.5% below 3.08x. The DCF gives 77.35 USD per share at a discount rate of 8.87%. The fair value from historical multiples is 53.30 USD. The fair value band runs from 52.26 to 78.40 USD with a midpoint of 65.33 USD, a margin of safety of 41.8% at a price of 46.06 USD. These figures rest on fixed assumptions, including a 5% equity risk premium and capped growth, so they are not a price target. The reverse DCF implies -5.3% growth a year. The dividend yield is 6.1%, the forward yield 6.3%, and the payout on free cash flow 55.5%.

Risks

The main risk is liquidity: a current ratio of 0.63 and a quick ratio of 0.47 leave little cushion if cash flows weaken. An Altman Z-score of 1.21 and net debt of 3.8 times EBITDA would make refinancing harder in a downturn, and interest coverage of 3.85x leaves less room if rates rise. Earnings per share have shrunk over three, five and ten years, and the ROIC spread over WACC is only 1.5 points, so returns above the cost of capital are thin. Negative estimate revisions suggest analysts are trimming their outlook. Stock-based compensation is not available, and the analysis cannot cover a debt maturity schedule or revenue by segment.