It has been several months since I last charted relative valuations in the sector, so it's time to see what the summer has wrought on EV/EBITDA ratios for fiber-based telecoms. Of course, we lost one name from my usual list when Fibernet Telecom Group was purchased by Zayo, but perhaps we can get it back someday if Zayo goes public. But beyond that, have the early signs of a recovery made themselves evident via higher market valuations? Here's the chart:
The range for September spanned 4 through 8, and the trend continues to be solidly upward, but for some more than others. glbc and Cogent Communications (NASDAQ:CCOI, news, filings) had a nice summer, starting to get some respect from the street that they will need to back up with some solid numbers in the second half of the year. Likewise, Level 3 Communications (NYSE:LVLT, news, filings) saw a substantial gain, however it had to do as much with falling EBITDA estimates as it did with rising stock prices - the market clearly expects them to start turning that trend around. The only company with a lower EV/EBITDA ratio since June was PAETEC (news, filings), but this is due to a May surge in their stock price that perhaps foreshadowed the higher EBITDA forecast based on the latest guidance.
As for the same chart using debt at par, things don't look that different anymore, as much more of the bonds in this sector are trading close to par.
So a recovery does seem to be in progress, at least amongst fiber based telecoms, although it is still a long way back to those times when EV/EBITDA ratios were often above 10. Heck, I seem to recall Cogent's being in the 20s.