In the first article in this series, a model to project future Frontier Communications (NYSE:FTR) financials based upon revenue, was described to provide forecasts for quarterly earnings going forward (the "Quarterly Earnings Model" or QEM). Using the QEM, one can employ a variety of revenue forecasts to calculate the financial performance that results, on a quarter-by-quarter basis, over the next four plus years through 4Q 2021, based upon different revenue premises. In this way, one now has the potential to evaluate "what ifs" using different revenue assumptions depending upon how well or how poorly Frontier can sustain the revenue-generating ability of its newly enlarged network. Future articles may use this model, upgraded by adding later information and adjusting model premises, to continue to offer forecasts of earnings and cash flow as well as to audit past performance of the QEM.
In this second article of the series, the author shares the investment scenario on which his investment in Frontier Communications Preferred Shares (FTRPR) is based. The purpose of this article is to illustrate the degree to which FTR is or is not sustainable as an enterprise over the foreseeable future using the QEM along with historical trend data.