Taking everything into account, TEF scores 4 out of 10 in our fundamental rating. TEF was compared to 36 industry peers in the Diversified Telecommunication Services industry. TEF has a medium profitability rating, but doesn't score so well on its financial health evaluation. TEF has a valuation in line with the averages, but on the other hand it scores bad on growth.

Quickly go to:

1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year TEF was profitable.
TEF had a positive operating cash flow in the past year.
The reported net income has been mixed in the past 5 years: TEF reported negative net income in multiple years.
Each year in the past 5 years TEF had a positive operating cash flow.

1.2 Ratios

The Return On Assets of TEF (-4.10%) is worse than 63.16% of its industry peers.
TEF has a worse Return On Equity (-21.56%) than 71.05% of its industry peers.
TEF's Return On Invested Capital of 7.73% is amongst the best of the industry. TEF outperforms 84.21% of its industry peers.
TEF had an Average Return On Invested Capital over the past 3 years of 3.43%. This is below the industry average of 6.71%.
The 3 year average ROIC (3.43%) for TEF is below the current ROIC(7.73%), indicating increased profibility in the last year.

		Industry Rank	Sector Rank
ROA	-4.1%
ROE	-21.56%
ROIC	7.73%

ROA(3y)0.08%

ROA(5y)1.74%

ROE(3y)0.1%

ROE(5y)9.53%

ROIC(3y)3.43%

ROIC(5y)3.52%

1.3 Margins

With a Operating Margin value of 12.00%, TEF perfoms like the industry average, outperforming 55.26% of the companies in the same industry.
In the last couple of years the Operating Margin of TEF has grown nicely.
Looking at the Gross Margin, with a value of 35.73%, TEF is doing worse than 78.95% of the companies in the same industry.
TEF's Gross Margin has been stable in the last couple of years.

		Industry Rank	Sector Rank
OM	12%
PM (TTM)	N/A
GM	35.73%

OM growth 3Y18.75%

OM growth 5Y8.06%

PM growth 3YN/A

PM growth 5YN/A

GM growth 3Y0.37%

GM growth 5Y-1.04%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is just above the Cost of Capital (WACC), so TEF is still creating some value.
Compared to 1 year ago, TEF has about the same amount of shares outstanding.
The number of shares outstanding for TEF has been reduced compared to 5 years ago.
Compared to 1 year ago, TEF has a worse debt to assets ratio.

2.2 Solvency

TEF has a debt to FCF ratio of 8.80. This is a slightly negative value and a sign of low solvency as TEF would need 8.80 years to pay back of all of its debts.
TEF's Debt to FCF ratio of 8.80 is fine compared to the rest of the industry. TEF outperforms 68.42% of its industry peers.
A Debt/Equity ratio of 2.07 is on the high side and indicates that TEF has dependencies on debt financing.
Looking at the Debt to Equity ratio, with a value of 2.07, TEF is doing worse than 71.05% of the companies in the same industry.

		Industry Rank	Sector Rank
Debt/Equity	2.07
Debt/FCF	8.8
Altman-Z	N/A

ROIC/WACC1.79

WACC4.31%

2.3 Liquidity

A Current Ratio of 0.84 indicates that TEF may have some problems paying its short term obligations.
TEF has a worse Current ratio (0.84) than 73.68% of its industry peers.
A Quick Ratio of 0.80 indicates that TEF may have some problems paying its short term obligations.
TEF's Quick ratio of 0.80 is on the low side compared to the rest of the industry. TEF is outperformed by 76.32% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	0.84
Quick Ratio	0.8

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

TEF shows a strong negative growth in Earnings Per Share. In the last year the EPS decreased by -34.78%.
The Earnings Per Share has been decreasing by -8.73% on average over the past years.
Looking at the last year, TEF shows a very strong growth in Revenue. The Revenue has grown by 40.77%.
The Revenue has been decreasing by -3.12% on average over the past years.

EPS 1Y (TTM)-34.78%

EPS 3YN/A

EPS 5Y-8.73%

EPS Q2Q%-18.18%

Revenue 1Y (TTM)40.77%

Revenue growth 3Y1.7%

Revenue growth 5Y-3.12%

Sales Q2Q%-10.63%

3.2 Future

TEF is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 1.32% yearly.
Based on estimates for the next years, TEF will show a decrease in Revenue. The Revenue will decrease by -1.34% on average per year.

EPS Next Y-37.45%

EPS Next 2Y-9.99%

EPS Next 3Y-2.86%

EPS Next 5Y1.32%

Revenue Next Year-11.05%

Revenue Next 2Y-5.32%

Revenue Next 3Y-3.08%

Revenue Next 5Y-1.34%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

TEF is valuated reasonably with a Price/Earnings ratio of 10.89.
84.21% of the companies in the same industry are more expensive than TEF, based on the Price/Earnings ratio.
TEF's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 28.39.
With a Price/Forward Earnings ratio of 10.01, the valuation of TEF can be described as very reasonable.
86.84% of the companies in the same industry are more expensive than TEF, based on the Price/Forward Earnings ratio.
When comparing the Price/Forward Earnings ratio of TEF to the average of the S&P500 Index (25.72), we can say TEF is valued rather cheaply.

		Industry Rank	Sector Rank
PE	10.89
Fwd PE	10.01

4.2 Price Multiples

97.37% of the companies in the same industry are more expensive than TEF, based on the Price/Free Cash Flow ratio.

		Industry Rank	Sector Rank
P/FCF	3.75
EV/EBITDA	N/A

4.3 Compensation for Growth

TEF's earnings are expected to decrease with -2.86% in the coming years. This may justify a cheaper valuation.

PEG (NY)N/A

PEG (5Y)N/A

EPS Next 2Y-9.99%

EPS Next 3Y-2.86%

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5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 7.35%, TEF is a good candidate for dividend investing.
The stock price of TEF dropped by -26.73% in the last 3 months. With lower prices the dividend yield is higher, but it may be a sign investors do not trust the long term dividend.
Compared to an average industry Dividend Yield of 2.29, TEF pays a better dividend. On top of this TEF pays more dividend than 92.11% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 1.82, TEF pays a better dividend.

		Industry Rank	Sector Rank
Dividend Yield	7.35%

5.2 History

The dividend of TEF decreases each year by -5.71%.
TEF has paid a dividend for at least 10 years, which is a reliable track record.

Dividend Growth(5Y)-5.71%

Div Incr Years0

Div Non Decr Years0

5.3 Sustainability

The earnings of TEF are negative and hence is the payout ratio. TEF will probably not be able to sustain this dividend level.

DP-48.26%

EPS Next 2Y-9.99%

EPS Next 3Y-2.86%

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TELEFONICA SA-SPON ADR / TEF FAQ

What is the ChartMill fundamental rating of TELEFONICA SA-SPON ADR (TEF) stock?

ChartMill assigns a fundamental rating of 4 / 10 to TEF.

Can you provide the valuation status for TELEFONICA SA-SPON ADR?

ChartMill assigns a valuation rating of 6 / 10 to TELEFONICA SA-SPON ADR (TEF). This can be considered as Fairly Valued.

How profitable is TELEFONICA SA-SPON ADR (TEF) stock?

TELEFONICA SA-SPON ADR (TEF) has a profitability rating of 4 / 10.

What is the valuation of TELEFONICA SA-SPON ADR based on its PE and PB ratios?

The Price/Earnings (PE) ratio for TELEFONICA SA-SPON ADR (TEF) is 10.89 and the Price/Book (PB) ratio is 1.04.

What is the earnings growth outlook for TELEFONICA SA-SPON ADR?

The Earnings per Share (EPS) of TELEFONICA SA-SPON ADR (TEF) is expected to decline by -37.45% in the next year.