Assessing Frontier Communications Parent's (FYBR) Valuation After Recent Shareholder Return Momentum

Frontier Communications Parent (FYBR) recently caught investor attention after shares ticked upward, gaining nearly 10% over the past year. This performance comes as the company continues to improve annual revenue and net income growth, which has sparked renewed interest in its strategy.

See our latest analysis for Frontier Communications Parent.

Momentum appears to be building for Frontier Communications Parent, with the stock notching a 9.7% total shareholder return over the past year and an impressive 55.3% total shareholder return over three years. As investors respond to steady revenue gains and a swing toward profitability, recent buying hints at renewed optimism in the company's growth potential.

If this kind of performance has you scanning for the next mover, it might be the perfect time to broaden your search and discover fast growing stocks with high insider ownership

But with shares trading less than 2 percent below analyst price targets, investors may be wondering if there is still value left to unlock, or if the market has already factored in Frontier's expected growth.

Price-to-Sales of 1.6x: Is it justified?

Frontier Communications Parent shares trade at a price-to-sales ratio of 1.6x, which stands out as expensive compared to both peers and the broader telecom industry. The last close price of $37.85 reflects an expectation for higher growth or quality relative to competitors. The question remains whether the valuation truly fits the business fundamentals.

The price-to-sales (P/S) ratio measures how much investors are paying for each dollar of the company's revenue. For a telecom provider like Frontier, this can signal investor expectations for future revenue growth, expansion, or improved profitability.

With a P/S multiple of 1.6x, Frontier appears notably pricier than the peer average of 1.1x and the US Telecom industry's average of 1.2x. The market is assigning a premium to Frontier. Compared to the fair price-to-sales ratio of 1.2x, the current valuation appears stretched. Unless the company delivers standout performance or future growth surprises, there is potential for this gap to narrow over time.

Explore the SWS fair ratio for Frontier Communications Parent

Result: Price-to-Sales of 1.6x (OVERVALUED)

However, ongoing net losses and a lofty valuation could pose challenges for Frontier if growth expectations are not met in upcoming quarters.

Find out about the key risks to this Frontier Communications Parent narrative.

Another View: What Does the SWS DCF Model Say?

While the price-to-sales ratio makes Frontier look expensive compared to its peers, our SWS DCF model presents a more bullish scenario. According to this method, Frontier is trading nearly 59% below its fair value estimate, which suggests significant undervaluation. Could the market be overlooking long-term potential?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Frontier Communications Parent for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 874 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Frontier Communications Parent Narrative

If you see things differently or want to dig deeper into the numbers, remember, shaping your own Frontier Communications Parent narrative is quick and easy. It only takes a few minutes to get started. Do it your way

A great starting point for your Frontier Communications Parent research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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