Tuesday, December 28, 2010

Telus Corp 2

This is a stock (TSX-T) that I track, but do not own. This stock is in the Telecommunications section of the stock market, which I think is a rather risky area. This is a competitive and fast moving technological sector now and I think that it is currently quite risky. I have very little of my portfolio in this sector. I think you can do as well, with less risk, in other retail areas.

When I look at the insider trading report, I find a bit of insider selling and a bit more of insider buying. However, there is so little going on, we learn nothing. The only thing that says anything about how management feels about this company is the rise in dividends by 5.3% mid-way through 2010. This shows that that feel the company will make enough in cash flows and earnings to pay the new dividends.

My spreadsheet shows that the 5 year low median Price/Earnings Ratios is 13.6 and the 5 year high median P/E Ratio is 17.5. The current P/E that I get is 14.4 so this shows a reasonable stock price. Sites that use the last 12 months earnings get a higher P/E of 15.3, and this also shows a reasonable stock price. I get a Graham Price of $43.07, so a current stock price of $46.69 is just 8.4% higher. This points to an average stock price.

The 10 year average Price/Book Value Ratio is 1.76 and the current P/B Ratio is 1.84. The current P/B Ratio is about 5% higher. This shows a higher than average price. The last thing to look at is the dividend yield. I get a current one of 4.3%. This is better than the 5 year average of 3.4%. The dividend yield has been better in the past, but it is better than the average one, so this points to a good current price. All this just says is that the stock price is probably a reasonable one.

When I look at what the analysts’ recommendations are, I find Strong Buy, Buy, Hold and Underperform. The larges number of recommendations falls into the Hold and Buy places. The consensus is probably a Hold. (See my site for information on analyst ratings.) The difference in the 12 month stock price between Hold and Buy is not large, with the Hold going for $48 and the Buy going for $52.

Analysts that give this stock a Hold recommendation say they like BCE (TSX-BCE) and Rogers (TSX-RCI.B) better. Some are concerned about the quality of the earnings. Some are concerned about the cash flow and debt levels. (The current Asset/Book Value Ratio or Leverage Ratio at 2.58 is a normal level.) Analysts that say to buy this stock feel that the dividends yield is good and there will be future dividend increases. They also think that this stock is recovering nicely.

I already own some BCE stock, so I am not currently interested in this stock.

Telus is a national telecommunications company in Canada. Telus provides a wide range of communications products and services including data, Internet protocol (IP), voice, entertainment and video. Its web site is here Telus. See my spreadsheet at tel.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

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