This Telecom Has Outperformed the Big 3 and Has 20% Upside!

Quebecor Inc. (TSX:QBR.B) has an average 23% annual return over the past five years. Double-digit growth is expected to continue, far outpacing the Big Three.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Feds have long been clamouring for more wireless competition. After decades of dominance by Canada’s Big Three — Telus, BCE, and Rogers Communications — in 2017, Shaw Communications emerged as viable fourth option. We could also get a fifth.

There are significant barriers to entry in the telecommunications sector. Notably, the cost of building infrastructure can prove to be unwieldy for smaller players. Shaw has plenty of access to capital and, as such, it has a better chance of succeeding where others have failed.

The same can be said for Quebecor (TSX:QBR.B), a potential fifth major player in the industry. Last Thursday, the company announced it was launching discount wireless brand Fizz.

The details

Quebecor’s discount brand is being launched by Videotron, the Quebecor-owned telecom provider. The service will be available on its own network and will be made available to residents of Ontario and Quebec.

It is important to note that Videotron has proven successful at launching its own wireless business. Launched in 2010, Videotron’s business has captured about 16% of the Quebec mobile market.

The move follows a similar path by Canada’s Big Three, which have launched their own discount brands in recent years. The prepaid market is the largest untapped market in the Canadian mobile industry.

Performance

When interest rates rise, income stocks such as telecoms tend to underperform. This is not so for Quebecor. Year to date, the company has returned 11%, which is the best return in the industry. On average, Canada’s Big Three have lost approximately 1% thus far this year, while Shaw has seen a 12% decline in its share price.

The outperformance is similar over the past two- and five-year time frames. Over the past five years, Quebecor’s performance has been more than double its closest competitor, returning on average 23% yearly.

Why has Quebecor succeeded while others have struggled?

Growth prospects

The biggest issue for Canada’s Big Three is increased competition in a saturated market. These massive telecoms don’t have nearly the same growth rate and opportunities as the smaller, more nimble competitors such as Quebecor.

Quebecor has been growing earnings by a compound annual growth rate (CAGR) of 35% over the past five years. In certain cases, some of the Big Three have been posting negative earnings growth. Furthermore, Quebecor’s growth has been accelerating, while the opposite is true of Canada’s Big Three.

Analysts expect the company’s long-term growth rate to average 18% annually. In comparison, the Big Three are only expected to grow in the single digits. Likewise, analyst have an average price target of $31.43 and 13 out of the 14 covering the company rate it a “buy.” This implies 20% upside from today’s share price.

As of today, Quebecor is the best option for investors looking for growth in the telecom industry. Likewise, it is becoming a more attractive income play, having raised dividends by a CAGR of 28% over the past three years.

Should you invest $1,000 in Iamgold Corporation right now?

Before you buy stock in Iamgold Corporation, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Iamgold Corporation wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Mat Litalien is long Telus Corp.   

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

An investor uses a tablet
Stocks for Beginners

The Smartest Canadian Stock to Buy With $250 Right Now

Are you looking for the smartest Canadian stock to buy right now? Consider this gem and avoid market volatility.

Read more »

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

Electricity transmission towers with orange glowing wires against night sky
Investing

Fortis Just Might Be the Best Canadian Dividend Stock to Buy in April

Let's dive into a few reasons why Canadian utility giant Fortis (TSX:FTS) still looks like a screaming buy heading into…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

a man relaxes with his feet on a pile of books
Investing

Got $7,000? How I’d Spread It Across 5 Blue-Chip Stocks for an Investing Foundation

Spreading $7,000 across these five blue-chip stocks provides a solid foundation for long-term financial success.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

How I’d Allocate $10,000 to AI Stocks in Today’s Market

Shopify (TSX:SHOP) is one of Canada's most compelling AI stocks.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Retirement

Top Canadian Value Stocks I’d Hold in My TFSA for the Next Decade

These Canadian value stocks have significant growth potential and will enhance your TFSA portfolio’s return in the long run.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »