TELUS (TSE:T) (NYSE:TU) is one of the largest telecommunication carriers in Canada, covering 90%-95% of Canada’s telecom market. Apart from telecom, the company also dabbles in information technology solutions. Here’s a look into why the stock might be a great value bet.
Notably, most of the company’s “fibre-to-the-home” (FTTH) buildout has been done after humongous investments (TELUS has spent more than C$200 billion on infrastructure and spectrum-related costs since the turn of the century). The shift is expected to be 100% complete by the end of this year, and it will be beneficial to the company by boosting cash flows (via fewer capital expenditures) that can be leveraged in growth-driving initiatives, hiking dividends, and reducing debt.
Also, as part of its C$54 billion investment in 5G infrastructure through 2024, TELUS has managed to connect more than 70% of the Canadian population to the network so far. Given that the global 5G market is rapidly growing, TELUS stands a strong chance to benefit massively, thanks to its efforts combined with its dominance in the network infrastructure market in Canada.
A thing that stands out is its lower capital expenditure expectations. TELUS guided C$2.5 billion in CapEx in 2023, which is around C$1 billion below the annual capital requirement in 2022. According to an estimate by RBC Capital Markets, free cash flow in 2023 will be twice as much as it was in 2022, bolstering the financial position of the company.
With solid financial efficiency in place, TELUS has been able to remain consistent with its dividend payments. On November 4th, 2022, its quarterly dividend was increased by 7.2% year-over-year to C$0.3511 per share, yielding around 5.4% currently.
Is TELUS Stock a Buy or Sell?
On Wall Street, analysts have many nice things to say about TELUS stock. The stock has a Moderate Buy consensus rating based on six Buys and three Holds. The average price target of $24.03 indicates that the share price can rise by 24.7% in the next 12 months.
The Takeaway: Strong Growth Runway Ahead
The best thing about TELUS is that it serves various markets which have bright growth prospects ahead. Being a dominant, low-priced telecom stock, the path ahead looks safe despite the looming threat of a global recession. TELUS is currently a value buy, with its trailing-12-month P/E ratio of 17.9x more than 25% below its five-year average.
