CenturyLink provides communications services including local and long-distance voice, high-speed Internet, colocation, managed and cloud hosting, to residential and business customers.
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|Book value of equity per share||$12.42||-42.8%||-15.8%||-8.9%|
|BV including aggregate dividends||-34.2%||-4.8%||1.5%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
On December 1, 1997, Century acquired Pacific Telecom, Inc. ("PTI") in exchange for $1.503 billion cash. To finance the acquisition, which was accounted for as a purchase, Century borrowed $1.288 billion under its $1.6 billion senior unsecured credit facility dated August 28, 1997 with NationsBank of Texas, N.A. and a syndicate of other lenders. This debt matures in five years and carries floating-rate interest based upon London InterBank Offered Rates for short-term periods. The weighted average interest rate of this debt as of December 31, 1997 was 6.17%. Century paid the remainder of the PTI acquisition price with available cash.
On March 19, 2002, the Company signed a definitive agreement to sell all of its wireless operations to an affiliate of ALLTEL Corporation for $1.65 billion in cash, subject to adjustment. In connection with this transaction, the Company will divest its (i) interests in its majority-owned and operated cellular systems, which at December 31, 2001 served approximately 797,000 customers and had access to approximately 7.8 million pops, (ii) minority cellular equity interests representing approximately 2.0 million pops at December 31, 2001, and (iii) licenses to provide personal communications services covering 1.3 million pops in Wisconsin and Iowa. Subject to certain closing conditions, this transaction is expected to close in the third quarter of 2002. As a result, the Company's wireless operations have been reflected as discontinued operations and as assets held for sale in the Company's consolidated financial statements as of and for the three months ended March 31, 2002. Amounts reported for 2001 have been restated to conform to the 2002 presentation.
In February 2005, our board of directors approved a repurchase program authorizing us to repurchase up to an aggregate of $200 million of either our common stock or equity units prior to December 31, 2005 (which was subsequently extended to February 28, 2006). After we implemented our accelerated share repurchase program in May 2005, we did not purchase any securities under our $200 million repurchase program from June 2005 through December 2005 (the completion date of the accelerated share repurchase program). Therefore, no shares were repurchased during the fourth quarter of 2005 related to the $200 million program. As of December 31, 2005, we had authority to repurchase approximately $86.0 million in shares under our $200 million program. In January and February 2006, we repurchased approximately $72.6 million in shares (2,144,800 shares at an average price per share of $33.86). In February 2006, our board authorized a $1.0 billion share repurchase program that superseded the remaining portion of approximately $13 million of our $200 million program... Net cash used in financing activities was $491.7 million in 2005, $578.5 million in 2004 and $403.8 million in 2003. Payments of debt were $693.3 million in 2005 and $179.4 million in 2004. In accordance with previously announced stock repurchase programs, we repurchased 16.4 million shares (for $551.8 million) and 13.4 million shares (for $401.0 million) in 2005 and 2004, respectively. The 2005 repurchases include 12.9 million shares repurchased (for a total price of $437.5 million) under accelerated share repurchase agreements.
On July 1, 2009, pursuant to the terms and conditions of the Agreement and Plan of Merger, dated as of October 26, 2008, among Embarq Corporation, CenturyTel and Cajun Acquisition Company, a wholly owned subsidiary of CenturyTel ("Merger Sub"), Merger Sub merged with and into Embarq, with Embarq surviving as a wholly owned subsidiary of CenturyTel. The combined company has an operating presence in 33 states with approximately 7.3 million access lines and more than 2.1 million broadband customers, based on operating data as of June 30, 2009. As a result of the Merger, each outstanding share of Embarq common stock was converted into the right to receive 1.37 shares of our common stock ("CTL common stock"), with cash paid in lieu of fractional shares. As a result of the Merger, we delivered approximately $6.0 billion in CTL common stock (or approximately 196.1 million shares of CTL common stock) to Embarq stockholders, based on the number of Embarq shares outstanding as of June 30, 2009 and the closing price of the CTL common stock on June 30, 2009.
On April 1, 2011, we acquired Qwest Communications International Inc. through a merger transaction, with Qwest surviving the merger as a wholly-owned subsidiary of CenturyLink. As a result of the acquisition, each outstanding share of Qwest common stock was converted into the right to receive 0.1664 shares of CenturyLink common stock, with cash paid in lieu of fractional shares. Based on (i) the number of CenturyLink common shares issued to consummate the merger (294.0 million), (ii) the closing stock price of CTL common stock as of March 31, 2011 ($41.55), (iii) the estimated pre-combination portion of share-based compensation awards assumed by CenturyLink ($61 million) and (iv) cash paid in lieu of the issuance of fractional shares ($5 million), we estimate that the aggregate merger consideration approximated $12.282 billion.
On November 1, 2017, CenturyLink acquired Level 3 through successive merger transactions, including a merger of Level 3 with and into a merger subsidiary, which survived such merger as our indirect wholly-owned subsidiary under the name of Level 3 Parent, LLC. As a result of the acquisition, Level 3 shareholders received $26.50 per share in cash and 1.4286 shares of CenturyLink common stock, with cash paid in lieu of fractional shares, for each outstanding share of Level 3 common stock they owned at closing, subject to certain limited exceptions. Upon closing, CenturyLink shareholders owned approximately 51% and Level 3 shareholders owned approximately 49% of the combined company. At closing, we assumed Level 3's long-term debt of approximately $11 billion.