Stock market

Is BT Group one of the most valued shares in the FTSE 100?

Image source: Getty Images

BT Group (LSE:BT-A) has been one of them. FTSE 100Best Actor in May Yet on paper, it still looks like one of the index’s best value stocks.

At 126.3p per share, the telecoms company now trades on a forward price-to-earnings (P/E) ratio of 6.7 times. This is well below the Footsie average of 11 times.

Meanwhile, the potential dividend yield on BT shares is 6.1%. This beats the UK blue chip average by a large margin of 3.5%.

To wrap things up, the firm’s Price-to-Book (P/B) ratio currently stands at 0.9. Below 1, it indicates that the company trades at a discount to the value of its assets.

BT's price to book (P/B) value.
Created with TradingView.

Mixed results

Of course, the FTSE 100 is made up of different shares spanning different sectors.

Given the current issues in the telecoms sector — from pressures from high interest rates and tough economic conditions to large capex bills and regulatory uncertainty — it’s a good idea to compare BT’s share price with its How does it compare to larger industry peers?

Company Forward P/E ratio
BT Group 6.7 times
Vodafone Group 10.2 times
AT&T Inc 7.9 times
Verizon Communications Inc 8.6 times
Deutsche Telekom AG 12 times
Orange SA 13.5 times
Telefonica SA 9.9 times

As you can see from the table, the firm offers an industry-beating price-to-earnings ratio. Its forward P/E ratio is below 7 times which is below the average of 9.8 times for its peer group. It is also the smallest in this cluster of shares.

That said, BT shares don’t look that attractive from a valuation perspective when it comes to dividends. As the chart below shows, it is the fifth largest producer, behind (in descending order) Vodafone, Verizon, Orange and AT&T.

Dividend yield in telecom sector.
Created with TradingView.

Having said that, the 6.1% forward dividend yield is very close to the 6.5% sector average.

Decision

All things considered, I don’t believe BT shares provide an attractive enough value for me to invest. Some stocks are undervalued based on their poor growth prospects and high risk profiles. It’s a description that I think fits this FTSE 100 stock perfectly.

On the positive side, telecom companies should get a boost as our lives become increasingly digital. BT’s massive fiber laying program could put it in a strong position to take advantage of this opportunity.

But as well as facing industry pressures, the firm’s focus on the weak UK economy puts its internationally focused peers at risk of underperformance. This certainly explains why it trades at a lower P/E ratio than the other companies I’ve mentioned.

The latest financials show revenue rose just 1% in the 12 months to March. Profits also fell by 31% due to business division impairment.

With the UK facing a prolonged period of weak growth, there is a good chance that BT’s share price could remain under pressure. So while it looks cheap on paper, I’d rather buy other FTSE 100 value stocks today.


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button