Is Verizon Stock Still a Bargain After Latest 5G Expansion News?

If you are wondering what to do about Verizon Communications stock right now, you are definitely not alone. With the share price closing at $43.67 and a year-to-date gain of 8.6%, Verizon has caught the eye of investors who are looking for a strong telecom play with solid fundamentals. Over the last year, the stock has moved up by 5.5%, with a roller-coaster ride in between. Recent weeks have been a bit more muted, ticking up just 0.1% in the last seven days, but slipping 1.6% over the past month.

Recent market developments in the telecom space, such as increased attention to 5G infrastructure and ongoing debates about consumer demand, seem to be shifting risk perceptions around companies like Verizon. Long-term holders have seen a slight negative return over the past five years, but if you look at the bigger picture, the numbers suggest that things could be changing for the better, at least in the short and medium term.

What about value? By most objective measures, Verizon is looking relatively cheap right now. It passes 5 out of 6 key undervaluation checks, earning it a value score of 5. That is a signal that is hard to ignore, especially if you are screening for stocks that might be flying below the radar.

So how do we know if Verizon’s recent gains are justified, or if the stock is really as undervalued as it looks? Let’s dig into the most common valuation methods and see where Verizon stands. A little later, I’ll share a smarter perspective that might just change how you think about stock valuation altogether.

Why Verizon Communications is lagging behind its peers

Approach 1: Verizon Communications Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's worth by projecting its future cash flows and then discounting those back to today's value. This approach provides a present-day estimate of what the business should be worth based on its ability to generate cash over time.

For Verizon Communications, the DCF model begins with last year's Free Cash Flow totaling $15.3 billion. Analysts forecast growth in Free Cash Flow for the next five years, with a 2029 projection of $23.9 billion. Beyond these years, Simply Wall St extrapolates further increases, with nearly $29.0 billion projected by 2035. All projections are in dollars, reflecting strong gains after a period of stable cash generation.

Based on this model, Verizon’s estimated intrinsic value per share is $134.86, while the current share price is $43.67. This results in a calculated discount of 67.6%, suggesting that the stock is trading significantly below its projected intrinsic worth.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Verizon Communications.

Our Discounted Cash Flow (DCF) analysis suggests Verizon Communications is undervalued by 67.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Verizon Communications Price vs Earnings (PE)

When evaluating a profitable company like Verizon Communications, the Price-to-Earnings (PE) ratio remains one of the most reliable valuation tools. This is because it directly relates a company’s share price to its per-share earnings, making it especially useful when the business generates consistent profits.

It is important to remember that a "normal" or "fair" PE ratio for any company depends on several factors. Higher growth expectations can justify a higher PE, while increased risk or slower growth will generally lead to a lower PE being considered reasonable. Industry context and earnings stability also play crucial roles.

Verizon's current PE ratio is 10.1x. To put this in perspective, the average PE for the Telecom industry is 17.0x, and among its closest peers, the average is 24.4x. This makes Verizon appear cheap at first glance compared to both its industry and peers. However, these broad comparisons often overlook crucial factors that shape a company’s true value.

That is where Simply Wall St’s Fair Ratio comes in. This proprietary metric weighs several important elements, including Verizon’s earnings growth, profit margin, scale, industry dynamics, and overall risk profile, to suggest a PE ratio that truly fits the company. In this case, the Fair Ratio for Verizon is 15.7x. Because this method accounts for more than just rough averages, it provides a smarter, more holistic benchmark for value.

Comparing the Fair Ratio against the actual PE, Verizon is trading at a significant discount to what would be expected given its outlook and risks. This indicates that the stock is undervalued based on earnings multiples.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Verizon Communications Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, dynamic tool that allows you to define your story or outlook for a company like Verizon Communications by tying your assumptions about its future revenue, earnings, and margins directly to a financial forecast and a fair value estimate.

Unlike static valuations, Narratives empower you to connect the “why” behind your estimates with the actual numbers. You can instantly see how changes in Verizon’s business, industry, or news events affect what you believe the company is worth. Available right on the Simply Wall St platform’s Community page, Narratives are easy to use and trusted by millions of investors worldwide.

With Narratives, you can easily compare your Fair Value to Verizon’s current share price, helping you decide when it might be time to buy, hold, or sell. Narratives automatically update as new news or earnings data comes in, keeping your investment decisions informed and current.

For example, some investors believe Verizon’s fair value is as low as $42, while others see it as high as $58. It all depends on their assumptions and perspective, making Narratives an essential tool for smart, adaptive investing.

Do you think there's more to the story for Verizon Communications? Create your own Narrative to let the Community know!

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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