Cogeco Communications (TSX: CCA) is a Montreal-based communications corporation that operates in North America. Today, I want to discuss why I’m looking to snatch up this TSX stock, as we approach the midway point in October. Let’s jump in.
How has this TSX stock performed so far in 2022?
The S&P/TSX Composite Index plummeted 395 points to close out the previous week on Friday, October 7. Telecom, which is represented by the S&P/TSX Capped Communication Services Index, suffered a marginal decline in that same trading session. Investors on the hunt for stability should still consider snatching up equities in this space.
Shares of this TSX stock have dropped 7.5% week over week as of close on October 7. The stock has plunged 33% in the year-to-date period. Cogeco Communications stock has suffered setbacks since it peaked in April 2022.
Should investors be encouraged by Cogeco’s recent earnings?
Investors can expect to see this company’s final batch of fiscal 2022 results in November. In the third quarter (Q3) 2022, Cogeco delivered revenue growth of 16% to $754 million. Its Ohio broadband systems acquisition powered American broadband services revenue growth of 31% in constant currency. Meanwhile, Canadian broadband services revenue rose by 2.5% largely due to a dip in revenue during the same period in the previous year. Moreover, the lifting of public health restrictions bolstered media activities revenue by 6.8%. This strong revenue growth should pique investor interest in this top TSX stock.
Canadians looking for a more complete picture of Cogeco’s profitability may want to determine its EBITDA. That stands for earnings before interest, taxes, depreciation, and amortization. In Q3 2022, the company posted adjusted EBITDA growth of 16% to $353 million. Once again, this was powered by its American broadband services growth.
Cash flow from operating activities increased 32% year over year to $355 million. Meanwhile, free cash flow dipped 20% to $109 million due to higher capital expenditures.
Cogeco has performed well in the face of increasingly challenging economic conditions. A worsening market has made it more difficult to pursue its aggressive acquisition strategy as it claws for more cash. Regardless, both its American and Canadian broadband services delivered solid revenue growth. Moreover, Cogeco Media, the company’s radio business, has delivered strong ratings growth. However, it has become more difficult to navigate this legacy media in the modern economic climate. With luck, it will be able to attract advertisers, as it continues to post improvements to its ratings.
Is this TSX stock worth buying today?
This company unveiled its fiscal 2023 financial guidelines in its most recent quarterly report. Cogeco projects revenue growth between 2% and 4% on a constant-currency basis. Meanwhile, it expects adjusted EBITDA growth between 1.5% and 3.5%.
Shares of this TSX stock currently possess a very attractive price-to-earnings ratio of 7.5. Relative Strength Index (RSI) is a technical indicator that measures the price momentum of a given security. Cogeco last had an RSI of 21, which puts this TSX stock well in technically oversold territory. Meanwhile, Cogeco offers a quarterly dividend of $0.625 per share. That represents a solid 4.2% yield.
