Why Frontier Communications Parent, Inc. (NASDAQ:FYBR) Could Be Worth Watching

While Frontier Communications Parent, Inc. (NASDAQ:FYBR) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Frontier Communications Parent’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Frontier Communications Parent

What's The Opportunity In Frontier Communications Parent?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.79x is currently trading slightly below its industry peers’ ratio of 11.97x, which means if you buy Frontier Communications Parent today, you’d be paying a decent price for it. And if you believe that Frontier Communications Parent should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Frontier Communications Parent’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Frontier Communications Parent look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Frontier Communications Parent, at least in the near future.

What This Means For You

Are you a shareholder? Currently, FYBR appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on FYBR, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on FYBR for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on FYBR should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Frontier Communications Parent, you'd also look into what risks it is currently facing. For example, we've found that Frontier Communications Parent has 5 warning signs (3 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Frontier Communications Parent, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.