verizon communications inc. nyse: vz - washburn · pdf filestudent investment fund stock...

Student Investment Fund Stock Report Analysts: Xi Cheng, Tanner McAndrew, Luke Thompson, and Daniel Wadsworth

Verizon Communications Inc.

NYSE: VZ

Recommendation: Buy Recent Price: $32.69(12/1/2009) Industry: Telecom Services Market Cap: $86.2 B Target Price: $47.11 Sector: Technology

HIGHLIGHTS

VZs subsidiary (Verizon Wireless) is the world’s largest wireless service provide

VZ is expanding its presence in wireline services through an advance fiber optics network service called FiOS

VZ has experienced growth in revenue over the past five years and is on pace for an 11% increase in 2009

VZ has a consistently increased its dividend payout

There is large potential growth and development in the Telecom Industry

VZ has competitive advantages in distribution network and pipelines

Early Adoption of 4G Network Ranked as top 1 wireless service provider

in annual consumer report

INVESTMENT THESIS Demand for and dependence upon wireless technology has

exhibited a strong upward trend which is expected to continue in the future. Verizon is competitively positioned to take advantage of this trend.

Broadband service and the popularity of bundled services have increased substantially. With Verizon’s recent investment in this sector, the firm is expected to capture an increasing portion of demand.

VZ’s ability to successfully generate a strong ROIC, add economic value, and further improve their dividend payout coming out of a deep recession demonstrates the firm’s efficient operations and strong market position.

FIVE-YEAR PRICE PERFORMANCE VS. S&P500

FINANCIAL STATISTICS Strong and stable financial condition beyond major competitors Value Added Spread: ROIC over WACC Dividend Yield of 6.2% Relatively Safe Piotroski Scorecard Discounted cash flow analysis suggests the stock is undervalued

by as much as 37% Most competitors are overvalued or value destroyers Low correlation with other stocks in the Student Investment Fund

BUSINESS SUMMARY

Verizon Communications Inc. provides communication services in the United States and internationally. It operates in two segments, Wireline and Domestic Wireless. The Wireline segment provides voice, Internet access, broadband video and data, next generation Internet protocol (IP) network services, network access, and long distance services to consumers, carriers, businesses, and government customers. It operates a fiber-to-the-premises (FTTP) network under the FiOS service mark that offers bandwidth, and designed to handle future broadband and video applications. As of December 31, 2008, this segment’s wireline network included approximately 36,161,000 wireline access lines, 8,673,000 broadband connections, and 1,918,000 FiOS TV customers. The Domestic Wireless segment offers in wireless voice and data products, and other value-added services, as well as sells equipment. This segment serves approximately 80 million customers. The company was formerly known as Bell Atlantic Corporation and changed its name to Verizon Communications Inc. in June 2000.

VZ

Student Investment Fund: VZ

Business Segments Domestic Wireless (51% of 2008 sales revenue). VZ operates in the United States through Verizon Wireless, a joint venture between VZ and Vodafone Group PLC. The firm provides wireless voice and data services to the largest customer base in the United States. In its advertising, VZ claims to have the most reliable and largest network, covering 99 of the top 100 most populated metropolitan areas (a claim supported by customer satisfaction surveys). Revenue generated from this segment has become an increasingly larger proportion of aggregate revenue. This benefits VZ in that the wireless segment offers much higher margins than wireline. Wireline (49% of 2008 total revenue). VZ provides voice, video, data services, internet access, and next generation IP network services through it two strategic business units, Verizon Telecom and Verizon Business. Verizon Telecom services primarily residential and small businesses in 28 states, and sales from this segment accounted for 31% of aggregate 2008 revenue. Verizon Business provides services to larger business and government clients, servicing 98% of the Fortune 500 companies, and sales from the segment generated 18% of aggregate 2008 revenue.

Revenue Breakdown: The graph shows the revenue breakdown between wireline and wireless segments. There has been a shift from the wireline to wireless segment, due to the shrinking demand for wireline service. The increase in wireless revenue is driven by rising revenue in voice and data service. VZ’s goal is to be the market leader in providing


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wireless voice and data communication services in the United States. In fact, the shift does not compress VZ’s revenue, since wireless has higher gross margins than the wireline segment, offering better profitability. This explains how Verizon Wireless has emerged as the industry-leading wireless service provider in the U.S. in terms of operating income.

Macroeconomic Thesis The analysis in this section describes our top-down approach in selecting VZ. Several macroeconomic indicators are particularly relevant for the company and its industry.

Consumer Confidence

Consumer confidence increased in the 2nd quarter of 2009, but decreased again in the 3rd quarter. Many expect that consumer confidence will rebound in 2010, however. Despite the economic slowdown and lower consumer confidence, VZ’s sales revenue grew at a rate of 4.2% in 2008. When consumer confidence returns, VZ will have a more conducive environment to grow its revenue.

Business Spending on Communication Equipment Due to a massive economy wide cost-cutting process, companies which were impacted by the economic downturn spent less on communication equipment such as business software, wireless networking equipment, and telecommunication products. However, declines in telecom spending have remained at a steady plateau since the 2nd quarter of 2009. Even though the trend is flat for the 3rd quarter, there is potential for the sector to grow as the economy strengthens and companies make efforts to catch up spending on communication equipment.


Telephone Service Usage Trend

According to the Harris Poll on cell phone usage from 2006 to 2008, the amount of cell phone usage is increasing and the amount of traditional landline phone usage is decreasing.

In the bar charts above, cell phone users are those who only use cell phones to make phone calls. VoIP means voice-over Internet Protocol, a way to place phone calls through the Internet. The increasing trend in the number of cell phone holders/users and the declining trend in the same for

landline holders/users indicate that the wireless segment is dynamic and promising. VZ is currently well positioned in the wireless segment.

Demographic Profile - Cell Phone User Only

Among the total cell phone users indicated in red, people aged at 18-29 make up nearly half (49%) of the market. Among the total VoIP and cell phone users, people aged 18-29 represent nearly a quarter (22%) of the market

VZ’s products and services are aimed at this fast-growing, younger-age demographic.

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Consumer Reports

According to the annual survey of wireless customer satisfaction from Consumer Reports,Verizon was ranked as the number one wireless provider in customer satisfaction with high quality products and service in high-profile markets. Its main competitor, AT&T was ranked last. This further supports our thesis that VZ is well-positioned to further strengthen its leadership in the telecommunications sector.

Industry Trends

A steadily increasing

demand for internet access and a surging growth in demand for high-speed internet access will serve as a catalyst for increasing the size of Verizon’s market share and drive sustainable revenue growth.


Cell Phone Demand $96 Billion

Local Phone Demand $49 Billion

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phone spending has outpaced spending on wire line phone services. Also important, an increasing number of consumers are relying solely on cellular services to fulfill their telecommunication needs; 20.2% of U.S. households were wireless-only in June-09 compared to 7.7% in Jun-05.

Business Strategy and Positioning VZ aims to position the company for sustainable, long-term profitability by directing capital spending primarily toward higher growth markets such as high-speed wireless data services, fiber optics to premises, and expanded services to enterprise customers. The main company goal is to be the market leader in wireless voice and data communication services in the US. With the Acquisition of Alltell Corporation in January 2009, VZ became the largest wireless provider in the U.S. as measured by the total number of customers. Additionally, in wireline, the VZ goal is to become the leading broadband provider in every market in which the company operates.

Service Quality

VZ prioritizes customer service and aims to be the leading company in every market served. The company views superior product offerings and customer service experiences as a competitive differentiator and a catalyst for growing revenues and gaining market share.


Coverage Network As recently as the fourth

quarter of 2008, third party studies suggest that Verizon had the fewest dropped calls and ineffective phone call attempts among national wireless service providers. In its recent marketing

campaign, VZ illustrates its superior coverage of its Third Generation (3G) data network compared to its main competitor. The advantage is undeniable. Further, VZ plans to launch its 4G network in 2010, at least one year prior to that of the competitor.

Product Offerings

Most recently VZ has made efforts to pit its newest smart phone offering from Motorola, the Droid, directly against the phenomenally popular smart phone exclusive to its main competitor, the iPhone.

VZ and Motorola were aided by Google, who contributed to design of the Droid and granted the device the privilege of debuting the 2.0 version of the Android Operating System. Android’s open source code orientation is expected to give the phone an advantage over the iPhone in terms of the number of smart phone applications ultimately available. It also offers free turn by turn global positioning service through Google.

The Droid was launched November 6, 2009 with a strong buzz marketing campaign. Although it is too early for Droid sales figures to be available for comparisons, VZ’s stock price has risen in the recent weeks.

VZ creates value for shareowners by investing cash flows generated by business in opportunities and transactions that support the aforementioned strategic imperatives, thereby increasing customer satisfaction and usage of VZ products and services.


Valuation Discounted Cash Flow Valuation. Based upon a thorough DCF model using conservative assumptions VZ shares currently possess a fair value of $46.08 with a 12-month target price of $47.11. VZ’s closing price on December 1, 2009 was $32.69. Key assumptions used in the modeling process are outlined below and illustrated more extensively in Appendix B. Assumptions Revenue. Revenue is forecasted using an annual growth rate on a year-by-year basis. Revenue is projected to grow by 1% in 2009 and 3% per year thereafter. The historic five year compounded average growth in revenue was 10.3% and VZ is on track to experience growth of 11% in 2009. COGS. Cost of goods sold is forecasted as a percentage of sales. Historically, COGS has averaged 37.8% over the past five year. COGS is projected to be 39.5% of sales throughout forecasted years to represent the possibility of higher future wireless network equipment and servicing costs. SG&A. Selling and General Administrative expense has averaged 28.2% of sales over the past five years. It is forecasted to be 27.9% of sales into the future continue cost efficiencies recognized in the most recent years of operation. Diluted Share Growth. Share growth is assumed to decline at an annual rate of 0.5%. This compares to a five year average compounded growth of 0.2%, but is representative of a diminutive share buyback plan that was adopted in 2008. Dividend Growth. Dividend growth is forecasted on a year-by-year basis to more accurately reflect the current economic condition within which the firm operates. Growth is forecasted to average 1.8% annually over forecasted years which compares to the annual compounded average growth of 4.4% over the previous five years. Property Plant and Equipment. PPE is modeled on a year-by-year basis as a percentage of sales. It has averaged 98.3% of sales over the past five years, however, PPE was 88.9% of sales at the end of 2008. PPE is assumed to be 90% in 2009 and slowly increase to 91.5% in 2018. WACC. Using the Capital Asset Pricing Model with a beta of 0.9, risk free rate of 4.25%, and market risk premium of 6%, VZ’s weighted average cost of capital is calculated to be 7.86%. The beta of the firm was set to a considerably higher level when compared to a group of analyst’s estimates as well our linear regression analysis, both of which approximate a beta of 0.6. Model Results Margins. VZ is projected to maintain slightly lower profit margins throughout the forecasted years when compared to historic margins. These lower margins are brought by the conservative assumptions used throughout the modeling process. Historically Gross, Operating, in Net margins over the last five years


averaged 62.2%, 16.8%, and 7.3% respectively. This compares to the forecasted average gross, operating, and net margins of 60.5%, 17.8%, and 5.7% respectively.

ROA. Return on Assets over the forecasted years is projected to average 2.7% annually. This compares to the average of 3.7% between 2004 and 2008. The discrepancy between historical and forecasted ROA is again due to our conservative modeling approach as it pertains to the firm’s PPE and estimated revenue growth.

ROE. Return on Equity is estimated to average 14.2% between 2009 and 2018 which is slightly lower than the average of 15.7% between 2004 and 2008.

ROIC. VZ’s Return on Invested Capital is projected to average 12.2% annually throughout the forecasted period. When compared to the firms WACC of 7.86% it is evident that VZ is making efficient use of capital in its project selection and operations.

EVA and MVA. Economic Value has consistently been added over the prior five years, a trend that is forecasted to continue with an annual average EVA of $4.7 million through 2019. The DCF analysis indicates that VZ will also continue to add market value into the future with $14.1 billion value added between 2009 and 2019.

Free Cash Flow. Acquisitions over the last few years have adversely impacted the firms PPE account and consequently skewed FCF, however, VZ has still generated appealing FCF. It is forecasted that the firm will generate strong FCF through 2019 at an annual average of $10.6 million.

Per Share Valuation. The DCF analysis suggests that the per share intrinsic value of VZ is $46.08 in 2009 and $47.11 in 2010. The 52-week trading price has been between a low of $26.10 and high of $34.90. Considering the recent close price of $32.69 on December 1, 2009, a share of VZ stock is currently undervalued by approximately 41%.

Multiples Valuation. In an expanded valuation process historic multiples were used to estimate the future per-share price of the firm’s stock. The results of this analysis range from VZ’s shares being fairly valued to significantly undervalued. The per-share

intrinsic values calculated through our DCF analysis fall in between the estimates provided by our multiples analysis.


Insider Trading

Insiders to VZ demonstrated a strong selloff leading into the recession during early 2007. The selloff slowed in 2008 and has reverted during 2009 signifying that insiders are regaining confidence in VZ’s abilities to exploit the continuing trends and strong demand seen in the industry.

Risks

Unfavorable general economic conditions, such as a recession or economic slowdown, could negatively affect the affordability of and demand for some of Verizon’s products and services. In difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing purchases on higher margin services or obtaining products and services under lower cost programs offered by other companies. In addition, an unfavorable economic environment could cause adverse changes in the credit markets, increasing borrowing costs and the availability of financing.

Verizon faces significant competition that may reduce market share and lower profits. The rapid development of new technologies, services and products has eliminated the traditional distinction among services and brought new competitors to the market. Among these new competitors are other telephone companies, cable companies, wireless service providers, satellite providers, and electric utilities.

Changes in the regulatory framework, under which Verizon operates, could adversely affect their business prospects or results of operations. Verizon’s domestic operations are subject to regulation by the FCC and other federal, state, and local agencies. These regulatory regimes frequently restrict Verizon’s ability to operate in or provide specified products and services in designated areas. For example, the FCC grants wireless licenses for terms generally lasting 10 years that are subject to renewal, and there is no guarantee that the licenses will be renewed.


Ownership

Institutions and mutual funds owned 59% of VZ’s shares as of December 1, 2009. Top holders of the firm’s equity are summarized below:

Recommendation

Following a comprehensive analysis, VZ earns a “BUY” recommendation. Factors supporting this recommendation follow:

Strong demand for wireless and bundled broadband services continues to increase. VZ is strategically positioned to increase its share of these growing margins and has demonstrated its

ability to do so. A healthy ROIC has been maintained historically and is expected to remain at a sizable spread to the

firm’s WACC in the future. Demonstration of a strong historical pattern of consistently increasing dividends over the past 20 years.

Strong projected growth in FCF, EPS, and healthy ROICs are expected to support this dividend policy into the future.

Holder Shares % Out Value* Reported

Capital World Investors 130,697,900 4.6 $3,956,225,433 30-Sep-09Barclays Global Investors UK Holdings Ltd 119,735,030 4.22 $3,624,379,358 30-Sep-09Capital Research Global Investors 111,147,212 3.91 $3,364,426,107 30-Sep-09STATE STREET CORPORATION 102,150,960 3.6 $3,092,109,559 30-Sep-09VANGUARD GROUP, INC. (THE) 97,075,953 3.42 $2,938,489,097 30-Sep-09FMR LLC 47,044,916 1.66 $1,424,049,607 30-Sep-09NORTHERN TRUST CORPORATION 42,619,202 1.5 $1,309,688,077 30-Jun-09MORGAN STANLEY 38,998,994 1.37 $1,180,499,548 30-Sep-09JP MORGAN CHASE & COMPANY 36,130,065 1.27 $1,093,657,067 30-Sep-09Bank of New York Mellon Corporation 32,736,535 1.15 $990,934,914 30-Sep-09

Holder Shares % Out Value Reported

WASHINGTON MUTUAL INVESTORS FUND 60,030,000 2.11 $1,817,108,100 30-Sep-09CAPITAL INCOME BUILDER, INC. 56,853,000 2 $1,747,092,690 30-Jun-09INCOME FUND OF AMERICA INC 42,935,600 1.51 $1,319,410,988 30-Jun-09VANGUARD 500 INDEX FUND 27,242,545 0.96 $837,163,407 30-Jun-09INVESTMENT COMPANY OF AMERICA 27,190,400 0.96 $823,053,408 30-Sep-09VANGUARD TOTAL STOCK MARKET INDEX FUND 26,289,525 0.93 $807,877,103 30-Jun-09SPDR TRUST SERIES 1 26,009,308 0.92 $834,638,693 30-Sep-08VANGUARD INSTITUTIONAL INDEX FUND-INSTITUTIONAL INDEX FD 19,395,867 0.68 $596,034,992 30-Jun-09CAPITAL WORLD GROWTH AND INCOME FUND 17,639,600 0.62 $542,064,908 30-Jun-09VANGUARD/WINDSOR II 16,584,854 0.58 $531,876,267 31-Jul-09

TOP INSTITUTIONAL HOLDERS

TOP MUTUAL FUND HOLDERS

Verizon Technical Appendix, Page 1 of 8

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A B C D E F G H I J K L M N

Enter Firm Ticker VZ

Enter first financial statement year in cell B6 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average ManualTotal revenue 65,751 69,518 88,182 93,469 97,354 Revenue Growth 5.7% 26.8% 6.0% 4.2% 10.3%

Cost of goods sold 22,032 24,409 35,309 37,547 39,007 COGS % of Sales 33.5% 35.1% 40.0% 40.2% 40.1% 37.8% 39.5%

Gross profit 43,719 45,109 52,873 55,922 58,347SG&A expense 19,346 19,443 24,955 25,967 26,898 SG&A % of Sales 29.4% 28.0% 28.3% 27.8% 27.6% 28.2% 27.9%

Research & Development 0 0 0 0 0 R&D % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Depreciation/Amortization 13,503 13,615 14,545 14,377 14,565 D&A % of Sales 20.5% 19.6% 16.5% 15.4% 15.0% 17.4% 15.0%

Interest expense (income), operating 0 0 0 0 0 Inc. Exp. Oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Non-recurring expenses 0 (530) 0 0 0 Exp. Non-rec 0.0% -0.8% 0.0% 0.0% 0.0% -0.2%

Other operating expenses 0 0 0 0 0 Other exp. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Operating Income 10,870 12,581 13,373 15,578 16,884Interest income (expense), non-operating 0 0 0 0 0 Int. inc. non-oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Gain (loss) on sale of assets 0 0 0 0 0 Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other income, net (2,893) (4,133) (5,219) (6,086) (7,125) Other income, net -4.4% -5.9% -5.9% -6.5% -7.3% -6.0%

Income before tax 7,977 8,448 8,154 9,492 9,759Income tax 2,078 2,421 2,674 3,982 3,331 Tax rate 26.0% 28.7% 32.8% 42.0% 34.1% 32.7% 34.0%

Income after tax 5,899 6,027 5,480 5,510 6,428Minority interest 0 0 0 0 0 Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Equity in affiliates 0 0 0 0 0 Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

U.S. GAAP adjustment 0 0 0 0 0 U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net income before extraordinary items 5,899 6,027 5,480 5,510 6,428Extraordinary items, total 1,932 1,370 717 11 0 Extrordinary items

Net income 7,831 7,397 6,197 5,521 6,428Total adjustments to net income 0 0 0 0 0 Adjustments to NI

Basic weighted average shares 2,770 2,766 2,912 2,898 2,849 Share growth -0.1% 5.3% -0.5% -1.7% 0.7%

Basic EPS excluding extraordinary items 2.13 2.18 1.88 1.90 2.26Basic EPS including extraordinary items 2.83 2.67 2.13 1.91 2.26Diluted weighted average shares 2,831 2,817 2,938 2,902 2,850 Diluted share growth -0.5% 4.3% -1.2% -1.8% 0.2% -0.5%

Diluted EPS excluding extraordinary items 2.08 2.14 1.87 1.90 2.26Diluted EPS including extraordinary items 2.77 2.63 2.11 1.90 2.26Dividends per share -- common stock 1.54 1.62 1.64 1.67 1.78Gross dividends -- common stock 4,265 4,479 4,781 4,830 5,062 Dividend growth 5.0% 6.7% 1.0% 4.8% 4.4%

Retained earnings 3,566 2,918 1,416 691 1,366

Data Source: Thomson/Reuters

Too Unpredictable to forecast, so set to zero in forecasts

Too Unpredictable to forecast, so set to zero in forecasts

Forecasting PercentagesHistorical Income Statements

Forecasted income statement items are based on 5 years of historical average ratios unless a value is entered in the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the historical average is truly representative of what the firm can achieve in the future.


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Year-by-year dividend growth 3.00% 2.50% 2.00% 2.00% 2.00% 1.50% 1.50% 1.50% 1.00% 1.00%

Year-by-year revenue growth 1.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ETotal revenue 98,328 101,277 104,316 107,445 110,669 113,989 117,408 120,930 124,558 128,295

Cost of goods sold 38,839 40,005 41,205 42,441 43,714 45,025 46,376 47,768 49,201 50,677

Gross profit 59,488 61,273 63,111 65,004 66,954 68,963 71,032 73,163 75,358 77,619SG&A expense 27,433 28,256 29,104 29,977 30,877 31,803 32,757 33,740 34,752 35,794

Research & Development 0 0 0 0 0 0 0 0 0 0

Depreciation/Amortization 14,749 15,192 15,647 16,117 16,600 17,098 17,611 18,140 18,684 19,244

Interest expense (income), operating 0 0 0 0 0 0 0 0 0 0

Non-recurring expenses (150) (154) (159) (164) (169) (174) (179) (184) (190) (196)

Other operating expenses 0 0 0 0 0 0 0 0 0 0

Operating Income 17,456 17,979 18,519 19,074 19,646 20,236 20,843 21,468 22,112 22,776Interest income (expense), non-operating (2,774) (2,903) (3,035) (3,168) (3,304) (3,520) (3,661) (3,802) (3,941) (4,122)

Gain (loss) on sale of assets 0 0 0 0 0 0 0 0 0 0

Other income, net (5,918) (6,096) (6,278) (6,467) (6,661) (6,861) (7,066) (7,278) (7,497) (7,722)

Income before tax 8,763 8,980 9,205 9,439 9,682 9,855 10,115 10,387 10,674 10,932Income tax 2,980 3,053 3,130 3,209 3,292 3,351 3,439 3,532 3,629 3,717

Income after tax 5,784 5,927 6,076 6,230 6,390 6,505 6,676 6,856 7,045 7,215Minority interest 0 0 0 0 0 0 0 0 0 0

Equity in affiliates 0 0 0 0 0 0 0 0 0 0

U.S. GAAP adjustment 0 0 0 0 0 0 0 0 0 0

Net income before extraordinary items 5,784 5,927 6,076 6,230 6,390 6,505 6,676 6,856 7,045 7,215Extraordinary items, total 0 0 0 0 0 0 0 0 0 0

Net income 5,784 5,927 6,076 6,230 6,390 6,505 6,676 6,856 7,045 7,215Total adjustments to net income 0 0 0 0 0 0 0 0 0 0

Basic weighted average shares 2,869 2,889 2,910 2,930 2,951 2,972 2,993 3,014 3,035 3,056

Basic EPS excluding extraordinary items 2.02 2.05 2.09 2.13 2.17 2.19 2.23 2.27 2.32 2.36Basic EPS including extraordinary items 2.02 2.05 2.09 2.13 2.17 2.19 2.23 2.27 2.32 2.36Diluted weighted average shares 2,836 2,822 2,807 2,793 2,779 2,766 2,752 2,738 2,724 2,711

Diluted EPS excluding extraordinary items 2.04 2.10 2.16 2.23 2.30 2.35 2.43 2.50 2.59 2.66Diluted EPS including extraordinary items 2.04 2.10 2.16 2.23 2.30 2.35 2.43 2.50 2.59 2.66Dividends per share -- common stock 1.82 1.85 1.87 1.90 1.92 1.94 1.95 1.97 1.97 1.98Gross dividends -- common stock 5,214 5,344 5,451 5,560 5,671 5,756 5,843 5,930 5,990 6,050

Retained earnings 570 583 624 670 718 748 833 925 1,055 1,166

Forecasted Income Statements -- 10 Years

Revenues grow at the same rate each year unless a growth value is manually entered in the cell above the forecast year, in which case the year-by-year value overrides the historical or manual average. It makes sense to start tapering the growth forecasts 5 or 6 years into the forecast period.


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AA AB AC AD AE AF AG AH AI AJ AK AL AM AN

Enter Firm Ticker VZ

year 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Average ManualAssets

Cash & equivalents 2,290 760 3,219 1,153 9,782 Cash % of Sales 3.5% 1.1% 3.7% 1.2% 10.0% 3.9%

Short term investments 2,257 2,146 2,434 2,244 509 ST Invest. % of Sales 3.4% 3.1% 2.8% 2.4% 0.5% 2.4%

Receivables, total 9,801 8,534 10,891 11,736 11,703 Receivables % Sales 14.9% 12.3% 12.4% 12.6% 12.0% 12.8%

Inventory, total 1,535 1,522 1,514 1,729 2,092 Inventory % of Sales 2.3% 2.2% 1.7% 1.8% 2.1% 2.0%

Prepaid expenses 2,646 2,125 1,888 1,836 1,989 Pre. Exp. % of Sales 4.0% 3.1% 2.1% 2.0% 2.0% 2.6%

Other current assets, total 950 4,233 2,592 0 0 Other CA % of Sales 1.4% 6.1% 2.9% 0.0% 0.0% 2.1%

Total Current Assets 19,479 19,320 22,538 18,698 26,075Property, plant and equipment (net) 74,124 72,987 82,356 85,294 86,546 Net PPE % of Sales 112.7% 105.0% 93.4% 91.3% 88.9% 98.3%

Goodwill 837 315 5,655 5,245 6,035 Goodwill % of Sales 1.3% 0.5% 6.4% 5.6% 6.2% 4.0% 6.0%

Intangibles 46,611 51,849 56,099 55,784 67,173 Intangibles % of Sales 70.9% 74.6% 63.6% 59.7% 69.0% 67.6%

Long term investments 5,855 4,602 4,868 3,372 8,174 LT Invest. % of Sales 8.9% 6.6% 5.5% 3.6% 8.4% 6.6%

Notes receivable -- long term 0 0 0 0 0 Notes Rec. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Other long term assets, total 19,052 19,057 17,288 18,566 8,349 Other LT ass. % Sales 29.0% 27.4% 19.6% 19.9% 8.6% 20.9% 14.0%

Other assets, total 0 0 0 0 0 Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total assets 165,958 168,130 188,804 186,959 202,352Liabilities and Shareholders' Equity

Accounts payable 2,827 2,620 4,392 4,491 3,856 Acc. Payable % Sales 4.3% 3.8% 5.0% 4.8% 4.0% 4.4%

Payable/accrued 0 0 0 0 0 Pay/accured % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Accrued expenses 7,024 6,643 7,171 7,701 7,822 Acc. Exp. % of Sales 10.7% 9.6% 8.1% 8.2% 8.0% 8.9%

Notes payable/short term debt 0 0 3,576 390 1,487 Notes payable % Sales 0.0% 0.0% 4.1% 0.4% 1.5% 1.2%

Current portion of LT debt/Capital leases 3,593 6,688 4,139 2,564 3,506 Curr. debt % of Sales 5.5% 9.6% 4.7% 2.7% 3.6% 5.2%

Other current liabilities 9,685 10,749 13,002 9,595 9,235 Other curr liab % Sales 14.7% 15.5% 14.7% 10.3% 9.5% 12.9% 10.5%

Total Current Liabilities 23,129 26,700 32,280 24,741 25,906Long term debt, total 35,674 31,569 28,646 28,203 46,959 LT debt % of Sales

Deferred income tax 22,532 22,831 16,270 14,784 11,769 Def. inc. tax % Sales 34.3% 32.8% 18.5% 15.8% 12.1% 22.7%

Minority interest 25,053 26,433 28,337 32,288 37,199 Min. Int. % of Sales 38.1% 38.0% 32.1% 34.5% 38.2% 36.2%

Other liabilities, total 22,010 20,917 34,736 36,362 38,813 Other liab. % of Sales 33.5% 30.1% 39.4% 38.9% 39.9% 36.3%

Total Liabilities 128,398 128,450 140,269 136,378 160,646Preferred stock (redeemable) 0 0 0 0 0

Preferred stock (unredeemable) 0 0 0 0 0

Common stock 277 277 297 297 297Additonal paid-in capital 25,404 25,369 40,124 40,316 40,291Retained earnings (accumluated deficit) 12,984 15,905 17,324 17,884 19,250Treasury stock -- common (142) (353) (1,871) (3,489) (4,839)ESOP Debt Guarantee 90 265 191 79 79Other equity, total (1,053) (1,783) (7,530) (4,506) (13,372)

Total Shareholders' Equity 37,560 39,680 48,535 50,581 41,706Total Liabilities and Shareholders' Equity 165,958 168,130 188,804 186,959 202,352Diluted weighted average shares 2,831 2,817 2,938 2,902 2,850 Diluted share growth -0.5% 4.3% -1.2% -1.8% 0.2% -0.5%Total preferred shares outstanding 0 0 0 0 0 Preferred share growth N/A N/A N/A N/A N/A 0.0%

Historical Balance Sheets

Set to last historical year's level throughout the forecast.Set to last historical year's level throughout the forecast.

LT debt is manually adjustedfor AFN inthepro formas

Forecasting Percentages

Forecasted balance sheet items are based on 5 years of historical average ratios unless a value is entered in the manual cell, in which case the manual entry overrides the historical average. The idea is to consider whether the historical average is truly representative of what the firm can achieve in the future.

The model uses the more conservative diluted common shares number for total shares outstanding.


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AO AP AQ AR AS AT AU AV AW AX AY AZ

PPE/Sales 90.00% 90.00% 90.00% 90.00% 90.00% 91.00% 91.00% 91.00% 91.00% 91.50%

year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018EAssets

Cash & equivalents 3,836 3,951 4,070 4,192 4,318 4,447 4,581 4,718 4,860 5,006

Short term investments 2,400 2,472 2,546 2,622 2,701 2,782 2,866 2,952 3,040 3,131

Receivables, total 12,608 12,986 13,375 13,777 14,190 14,616 15,054 15,506 15,971 16,450

Inventory, total 2,014 2,074 2,136 2,200 2,266 2,334 2,404 2,477 2,551 2,627

Prepaid expenses 2,602 2,680 2,760 2,843 2,928 3,016 3,106 3,200 3,296 3,395

Other current assets, total 2,060 2,121 2,185 2,251 2,318 2,388 2,459 2,533 2,609 2,687

Total Current Assets 25,519 26,284 27,073 27,885 28,721 29,583 30,471 31,385 32,326 33,296Property, plant and equipment (net) 88,495 91,150 93,884 96,701 99,602 103,730 106,841 110,047 113,348 117,390

Goodwill 5,900 6,077 6,259 6,447 6,640 6,839 7,044 7,256 7,474 7,698

Intangibles 66,424 68,417 70,470 72,584 74,761 77,004 79,314 81,694 84,145 86,669

Long term investments 6,499 6,694 6,895 7,102 7,315 7,534 7,760 7,993 8,233 8,480

Notes receivable -- long term 0 0 0 0 0 0 0 0 0 0

Other long term assets, total 13,766 14,179 14,604 15,042 15,494 15,958 16,437 16,930 17,438 17,961

Other assets, total 0 0 0 0 0 0 0 0 0 0

Total assets 206,603 212,801 219,185 225,760 232,533 240,649 247,868 255,305 262,964 271,494Liabilities and Shareholders' Equity

Accounts payable 4,290 4,419 4,551 4,688 4,828 4,973 5,122 5,276 5,434 5,597

Payable/accrued 0 0 0 0 0 0 0 0 0 0

Accrued expenses 8,780 9,043 9,314 9,594 9,881 10,178 10,483 10,798 11,122 11,455

Notes payable/short term debt 1,180 1,215 1,252 1,289 1,328 1,368 1,409 1,451 1,495 1,540

Current portion of LT debt/Capital leases 5,137 5,291 5,450 5,614 5,782 5,955 6,134 6,318 6,508 6,703

Other current liabilities 10,324 10,634 10,953 11,282 11,620 11,969 12,328 12,698 13,079 13,471

Total Current Liabilities 29,711 30,602 31,520 32,466 33,440 34,443 35,477 36,541 37,637 38,766Long term debt, total 40,967 42,882 44,829 46,809 48,819 52,022 54,118 56,210 58,262 60,938

Deferred income tax 22,314 22,983 23,673 24,383 25,114 25,868 26,644 27,443 28,267 29,115

Minority interest 35,597 36,665 37,765 38,898 40,065 41,267 42,505 43,780 45,094 46,447

Other liabilities, total 35,737 36,809 37,914 39,051 40,223 41,429 42,672 43,952 45,271 46,629

Total Liabilities 164,327 169,942 175,701 181,607 187,662 195,029 201,416 207,926 214,530 221,895Preferred stock (redeemable) 0 0 0 0 0 0 0 0 0 0

Preferred stock (unredeemable) 0 0 0 0 0 0 0 0 0 0

Common stock 297 297 297 297 297 297 297 297 297 297Additonal paid-in capital 40,291 40,291 40,291 40,291 40,291 40,291 40,291 40,291 40,291 40,291Retained earnings (accumluated deficit) 19,820 20,403 21,027 21,697 22,415 23,164 23,997 24,922 25,978 27,143Treasury stock -- common (4,839) (4,839) (4,839) (4,839) (4,839) (4,839) (4,839) (4,839) (4,839) (4,839)ESOP Debt Guarantee 79 79 79 79 79 79 79 79 79 79Other equity, total (13,372) (13,372) (13,372) (13,372) (13,372) (13,372) (13,372) (13,372) (13,372) (13,372)

Total Shareholders' Equity 42,276 42,859 43,483 44,153 44,871 45,620 46,453 47,378 48,434 49,599Total Liabilities and Shareholders' Equity 206,603 212,801 219,185 225,760 232,533 240,649 247,868 255,305 262,964 271,494Total common shares (diluted) 2,836 2,822 2,807 2,793 2,779 2,766 2,752 2,738 2,724 2,711Total preferred shares outstanding 0 0 0 0 0 0 0 0 0 0AFN (interactive with 3 items below) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Adjustment to LT Debt (iterate or use Goal Seek (5,991.9) 1,914.5 1,947.7 1,979.8 2,010.4 3,202.4 2,095.9 2,091.9 2,052.2 2,676.6Issue Common Stock to Fund AFNSet Balance Sheet Cash Lower to Fund AFN

Forecasted Balance Sheets -- 10 Years

Model maintains a fixed ratio of ST debt/sales. LT debt is adjusted for shortfalls/surpluses of AFN. Every time something changes that affects the forecasts, set row 49 entries to zero and use Goal Seek to set row 48 AFN to zero by adjusting row 49 . (Write a macro to b alance all 10 years at once). If you want to issue common stock in


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BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BPEnter Firm Ticker VZ

2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ELiquidity

Current 0.84 0.72 0.70 0.76 1.01 0.86 0.86 0.86 0.86 0.86 0.86 0.86 0.86 0.86 0.86

Quick 0.78 0.67 0.65 0.69 0.93 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.79

Net Working Capital to Total Assets (0.02) (0.04) (0.05) (0.03) 0.00 (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02) (0.02)

Asset ManagementDays Sales Outstanding 54.41 44.81 45.08 45.83 43.88 46.80 46.80 46.80 46.80 46.80 46.80 46.80 46.80 46.80 46.80

Inventory Turnover 42.83 45.68 58.24 54.06 46.54 48.83 48.83 48.83 48.83 48.83 48.83 48.83 48.83 48.83 48.83

Fixed Assets Turnover 0.89 0.95 1.07 1.10 1.12 1.11 1.11 1.11 1.11 1.11 1.10 1.10 1.10 1.10 1.09

Total Assets Turnover 0.40 0.41 0.47 0.50 0.48 0.48 0.48 0.48 0.48 0.48 0.47 0.47 0.47 0.47 0.47

Debt ManagementLong-Term Debt to Equity 95.0% 79.6% 59.0% 55.8% 112.6% 96.9% 100.1% 103.1% 106.0% 108.8% 114.0% 116.5% 118.6% 120.3% 122.9%

Total Debt to Total Assets 21.5% 18.8% 17.1% 15.3% 23.9% 20.4% 20.7% 21.0% 21.3% 21.6% 22.2% 22.4% 22.6% 22.7% 23.0%

Times Interest Earned N/A N/A N/A N/A N/A 6.3 6.2 6.1 6.0 5.9 5.7 5.7 5.6 5.6 5.5

ProfitabilityGross Profit Margin 66.5% 64.9% 60.0% 59.8% 59.9% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5% 60.5%

Operating Profit Margin 16.5% 18.1% 15.2% 16.7% 17.3% 17.8% 17.8% 17.8% 17.8% 17.8% 17.8% 17.8% 17.8% 17.8% 17.8%

Net After-Tax Profit Margin 9.0% 8.7% 6.2% 5.9% 6.6% 5.9% 5.9% 5.8% 5.8% 5.8% 5.7% 5.7% 5.7% 5.7% 5.6%

Total Assets Turnover 0.40 0.41 0.47 0.50 0.48 0.48 0.48 0.48 0.48 0.48 0.47 0.47 0.47 0.47 0.47

Return on Assets 4.7% 4.4% 3.3% 3.0% 3.2% 2.8% 2.8% 2.8% 2.8% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%

Equity Multiplier 4.42 4.24 3.89 3.70 4.85 4.89 4.97 5.04 5.11 5.18 5.28 5.34 5.39 5.43 5.47

Return on Equity 20.8% 18.6% 12.8% 10.9% 15.4% 13.7% 13.8% 14.0% 14.1% 14.2% 14.3% 14.4% 14.5% 14.5% 14.5%

EPS (using diluted shares, excluding extraordinary items 2.08 2.14 1.87 1.90 2.26 2.04 2.10 2.16 2.23 2.30 2.35 2.43 2.50 2.59 2.66

DPS (dividends per share) 1.51 1.59 1.63 1.66 1.78 1.84 1.89 1.94 1.99 2.04 2.08 2.12 2.17 2.20 2.23

0.18789162

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018NOPAT (net operating profit after tax) 8,038 8,976 8,987 9,043 11,121 11,521 11,866 12,222 12,589 12,967 13,356 13,756 14,169 14,594 15,032

ROIC (return on invested capital) 10.3% 12.0% 10.4% 10.3% 11.3% 12.3% 12.3% 12.3% 12.3% 12.3% 12.1% 12.1% 12.1% 12.1% 12.1%

EVA (economic value added) 1,919 3,120 2,199 2,152 3,387 4,145 4,270 4,398 4,530 4,666 4,716 4,858 5,003 5,154 5,258

FCF (free cash flow) N/A 12,335 (2,890) 7,740 396 16,083 9,050 9,321 9,601 9,889 9,046 10,457 10,771 11,094 10,785

Weighted Average Cost of Capital 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9%

Net Operating Working Capital (NOWC) 3,775 1,553 4,061 2,426 11,899 5,388 5,550 5,716 5,888 6,064 6,246 6,434 6,627 6,825 7,030

Operating Long Term Assets 74,124 72,987 82,356 85,294 86,546 88,495 91,150 93,884 96,701 99,602 103,730 106,841 110,047 113,348 117,390Total Operating Capital 77,899 74,540 86,417 87,720 98,445 93,883 96,699 99,600 102,588 105,666 109,976 113,275 116,673 120,174 124,420

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Long-term Horizon Value Growth Rate (user-supplied) 2.50%PV of Forecasted FCF, discounted at 7.86% $169,351 $166,572 $170,608 $174,689 $178,812 $182,970 $188,297 $192,633 $196,995 $201,376 $206,410Value of Non-Operating Assets $10,291 $6,236 $6,423 $6,616 $6,814 $7,019 $7,229 $7,446 $7,670 $7,900 $8,137Total Intrinsic Value of the Firm $179,642 $172,809 $177,031 $181,305 $185,626 $189,988 $195,527 $200,079 $204,664 $209,276 $214,547Intrinsic Market Value of the Equity $131,196 $130,662 $132,934 $135,224 $137,528 $139,841 $142,137 $144,552 $147,003 $149,519 $152,069Per Share Intrinsic Value of the Firm $46.03 $46.08 $47.11 $48.17 $49.23 $50.31 $51.40 $52.53 $53.69 $54.88 $56.10MVA (market value added) $89,490 $88,386 $90,076 $91,741 $93,375 $94,970 $96,518 $98,099 $99,625 $101,086 $102,470

Item Value Percent Cost Weighted Cost Risk Free Rate 4.25% Bloomberg (9/17/09)ST Debt (from most recent balance sheet) 1,487 1.05% 2.31% 0.02% Beta 0.90 Source: MSNMoneycentralLT Debt (from most recent balance sheet) 46,959 33.26% 6.71% 1.50% Market Risk Prem. 6.00%MV Equity (look up stock's mkt. cap and enter in cell BB53 92,750 65.69% 9.65% 6.34% Cost of Equity 9.65%Weighted Average Cost of Capital 7.86%

Weighted Average Cost of Capital Calculations Capital Asset Pricing Model

Forecasted Ratios and Valuation Model -- 10 Years

Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions) Forecasted Valuation Metrics -- 10 Years

values in millions

Historical Ratios and Valuation Model

Valuation (in millions where appropriate) -- through year 2018


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BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH

Inputs 2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018EPer share value (hist. & DCF est.) $30.45 $23.69 $31.88 $38.96 $31.92 $46.08 $47.11 $48.17 $49.23 $50.31 $51.40 $52.53 $53.69 $54.88 $56.10

Market capitalization $84,347 $65,527 $92,835 $112,906 $90,940 $132,198 $136,127 $140,150 $144,264 $148,468 $152,734 $157,211 $161,814 $166,577 $171,471

EBITDA $23,412 $23,433 $23,416 $23,880 $24,324 $26,287 $27,075 $27,888 $28,724 $29,586 $30,473 $31,388 $32,329 $33,299 $34,298

Enterprise Value $142,784 $122,769 $150,175 $172,634 $166,803 $206,106 $212,938 $219,926 $227,069 $234,363 $242,944 $250,662 $258,537 $266,568 $275,390

MultiplesPrice/Sales 1.28 0.94 1.05 1.21 0.93 1.34 1.34 1.34 1.34 1.34 1.34 1.34 1.34 1.34 1.34

Price/EBITDA 3.60 2.80 3.96 4.73 3.74 5.03 5.03 5.03 5.02 5.02 5.01 5.01 5.01 5.00 5.00

Price/Free Cash Flow N/A 5.32 -30.52 14.66 233.57 8.22 15.04 15.04 15.03 15.01 16.88 15.03 15.02 15.02 15.90

Enterprise Value/EBITDA 6.10 5.24 6.41 7.23 6.86 7.84 7.86 7.89 7.91 7.92 7.97 7.99 8.00 8.01 8.03

Price/Earnings 14.61 11.07 17.09 20.52 14.15 22.59 22.43 22.26 22.08 21.89 21.85 21.65 21.44 21.22 21.08

Free Cash Flow Yield 18.5% -3.1% 6.8% 0.4% 12.3% 6.8% 6.9% 7.0% 7.1% 6.4% 7.2% 7.3% 7.4% 7.1%

Dividend Yield 4.95% 6.71% 5.10% 4.27% 5.56% 3.99% 4.02% 4.03% 4.04% 4.06% 4.05% 4.04% 4.03% 4.01% 3.98%

Historical OverrideValuation Estimates Based On: Average w/Manual 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E

Price/Sales 1.08 $37.59 $38.91 $40.28 $41.70 $43.16 $44.68 $46.25 $47.88 $49.56 $51.31

Price/EBITDA 3.77 3.50 $32.07 $32.80 $33.54 $34.31 $35.09 $35.89 $36.71 $37.54 $38.40 $39.27

Price/Free Cash Flow 55.76 15.00 $84.08 $46.98 $48.05 $49.15 $50.27 $45.66 $52.41 $53.61 $54.83 $52.93

Enterprise Value/EBITDA 6.37 $58.34 $59.67 $61.03 $62.42 $63.84 $65.30 $66.78 $68.31 $69.86 $71.45

Price/Earnings 15.49 16.00 $32.25 $32.82 $33.41 $34.02 $34.65 $35.02 $35.69 $36.40 $37.14 $37.77

Low Price $32.07 $32.80 $33.41 $34.02 $34.65 $35.02 $35.69 $36.40 $37.14 $37.77

High Price $84.08 $59.67 $61.03 $62.42 $63.84 $65.30 $66.78 $68.31 $69.86 $71.45

DCF Price $46.08 $47.11 $48.17 $49.23 $50.31 $51.40 $52.53 $53.69 $54.88 $56.10

Historical Ratios and Valuation Forecasted Ratios and Valuation

Forecasted Stock Prices Based on Historical Multiples -- 10 Years

In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks ‐‐ P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the various multiples, we may want to adjust our forecast assumptions. 1. You will need to look up the company's year‐end stock prices and enter them in the first 5 (historical) years of the "per share value" category.2. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG47‐BP47.3. Market capitalization will be calculated as basic weighted shares x historical year‐end prices and then forecasted basic weighted shares x DCF forecasted prices.4. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values.

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Add

ed

Econ

omic Value

Add

ed

Economic Value Added & Market Value Added (millions)

Economic Value Added Market Value Added

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

EPS an

d DPS

Earnings and Dividends Per Share

Earnings Per Share Dividends Per Share


12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39404142434445464748495051525354555657

DC DD DE DF DG DH DI DJ DK DL DM DN DO DP DQ DR DS DT DU DV

5

10

15

20

MSFT an

d IBM

Peer Comparison: Price/Earnings Ratio

VZ T

05,00010,00015,00020,00025,00030,00035,00040,00045,00050,000

Short Interst (tho

usan

ds)

Short Interest (thousands of shares)

Short Interest (thousands of shares)

0

5,000

10,000

15,000

20,000

25,000

30,000

Avg. Daily Volum

e

Average Daily Trading Volume (thousands)

Average Daily Volume (thousands of shares)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Days to Cov

er Ratio

Days to Cover Ratio (Short Interest / Volume)

Days to Cover

10

20

30

40

50

60

70

80

90

0

2

4

6

8

10

12

AAPL

MSFT an

d IBM

Peer Comparison: Price/Cash Flow Ratio

VZ T CHL

0123456789

10

Peer Comparison: Price/Sales Ratio

VZ T CHL

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