Critical Review: OI (OIBR) & Level 3 Communications (LVLT)

OI (NYSE: OIBR) and Level 3 Communications (NYSE:LVLT) are both integrated telecommunications services – nec companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, institutional ownership, valuation, analyst recommendations and risk.

Volatility & Risk

OI has a beta of 1.83, suggesting that its stock price is 83% more volatile than the S&P 500. Comparatively, Level 3 Communications has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500.

Profitability

This table compares OI and Level 3 Communications’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
OI -24.34% -49.64% -7.06%
Level 3 Communications 7.47% 5.52% 2.45%

Insider & Institutional Ownership

98.8% of Level 3 Communications shares are owned by institutional investors. 0.5% of Level 3 Communications shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares OI and Level 3 Communications’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
OI N/A N/A N/A ($3.22) -2.11
Level 3 Communications N/A N/A N/A $1.77 30.30

OI is trading at a lower price-to-earnings ratio than Level 3 Communications, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and recommmendations for OI and Level 3 Communications, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OI 0 0 0 0 N/A
Level 3 Communications 1 3 0 0 1.75

Level 3 Communications has a consensus target price of $60.16, suggesting a potential upside of 12.18%. Given Level 3 Communications’ higher probable upside, analysts clearly believe Level 3 Communications is more favorable than OI.

Summary

Level 3 Communications beats OI on 8 of the 9 factors compared between the two stocks.

About OI

Oi S.A. is an integrated telecommunications service provider in Brazil. The Company is a switched fixed-line telephony services (STFC) concessionaire. It is engaged in the provision of STFC as a local and intraregional long-distance carrier. Its segments include Residential Services, Personal Mobility, and SMEs/Corporate. It offers a range of integrated telecommunications services that include fixed and mobile, broadband, pay television (TV), data transmission and Internet provider services. The Company’s Residential Services segment is focused on the sale of fixed telephony services, including voice services, data communication services (broadband), and pay TV. The Personal Mobility segment is focused on the sale of mobile telephony services to subscription and prepaid customers, and mobile broadband customer. The SMEs/Corporate segment includes corporate solutions offered to its small, medium-sized, and large corporate customers.

About Level 3 Communications

Level 3 Communications, Inc. is a provider of a range of integrated communications services. The Company’s operating segments include North America, EMEA and Latin America. The North America includes operations in Atlanta, Georgia; Littleton, Colorado; Miami, Florida; Montreal, Canada; New York, New York; Phoenix, Arizona; Pittsburgh, Pennsylvania; Southfield, Michigan, and Tulsa, Oklahoma. The Europe segment includes operations in Basingstoke, England; Crewe, England; Dublin, Ireland; London, England; Amsterdam, The Netherlands, and Paris, France. The Latin America includes operations in Colombia; Buenos Aires, Argentina; Caracas, Venezuela; Lima, Peru; Quito, Ecuador; Santiago, Chile, and Sao Paulo, Brazil. It offers optical, Internet Protocol, computing and storage technologies. It offers a range of communications services, including Internet Protocol (IP) and data services, transport and fiber services, colocation and data center services, security services and voice services.

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