Avoid These Telecom Value Traps: AT&T Inc. (T), Vodafone Group Plc (ADR) (VOD)

Vodafone is also struggling with its European operations. To add to its worries, Indian government authorities are alleging Vodafone for not coughing up its due taxes. According to authorities, Vodafone India deliberately undervalued its Transfer Pricing, in order to save taxes. Shares of Vodafone have slid by nearly 20% over the last 5 years, and without a practical turnaround plan, the slide may continue.

The Savior

Shares of Verizon Communications Inc. (NYSE:VZ) may have risen by 20% over the last 5 years, but I believe there is still potential upside. The company is focusing largely on domestic growth, and its balance sheet appears to be solid.

(Source Finviz)

Although, Verizon appears to be trading at a premium, it’s not overvalued by any means. That apart, Verizon sports the best set of financial metrics amongst the mentioned peers. Its shares have risen by 22.83%, and have clearly outperformed the industry returns over the last 1 year.

Foolish Conclusion

Verizon is the market leader in wireless market. The company has been reporting solid growth in cash flow from operations, and over the last 5 years, the metric has expanded by nearly 25%. Although the company’s quarterly financial performance was mediocre, it is however less susceptible to market risks due to strong fundamentals and distance from troubled economies. Since its peers have their share of problems, investing in them won’t be as profitable. AT&T is the closest peer, but its expansion plans for Europe is the only thing going against it. Thus, only Verizon gets a Foolish Buy Rating!

The article Avoid These Telecom Value Traps originally appeared on Fool.com and is written by Piyush Arora.

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