Quebecor: Buy, Sell, or Hold in 2025?

There has been a lot of back and forth for investors interested in Quebecor, but what does 2025 hold?

| More on:
data analyze research

Image source: Getty Images

Quebecor (TSX:QBR.B) presents an interesting opportunity for investors in 2025, with a mix of strengths and challenges that require careful evaluation. The company has performed admirably in the telecommunications and media sectors. Yet its high debt levels and the broader economic environment introduce some complexities for investors to consider. So, let’s dig into whether this stock is a buy, sell, or hold this year.

The numbers

Quebecor stock’s 2024 financial performance was strong, largely driven by its acquisition of Freedom Mobile, which significantly bolstered its telecommunications segment. The company reported total revenues of $5.43 billion for 2023, a robust 19.9% year-over-year increase. This growth was accompanied by adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.24 billion, marking a 15.7% improvement from the previous year.

Analyst sentiment towards Quebecor has been broadly positive. The consensus among eight analysts is a “moderate buy” rating, with an average 12-month price target of $38.31. This target suggests a potential upside of approximately 26.57% from current levels, indicating that many market observers see significant room for growth. These optimistic outlooks align with the company’s strategy of growth through acquisitions and service expansion.

Yet one of Quebecor’s most appealing features for income-focused investors is its dividend. Quebecor stock offers a forward annual dividend yield of 4.22%, supported by a payout ratio of 41.13%. This moderate payout ratio suggests that the company retains sufficient earnings to reinvest in its growth initiatives while still rewarding shareholders. Over the past five years, Quebecor’s average dividend yield has been 3.38%, indicating that the current yield is above historical norms and may reflect an attractive entry point for dividend investors.

What to watch

Despite these strengths, Quebecor’s high leverage is a notable concern. The company’s total debt currently stands at $7.94 billion, translating to a debt-to-equity ratio of 348.09%. While the company generates substantial cash flow at $1.66 billion in operating cash flow over the trailing 12 months, the high debt levels could present challenges. Investors should keep a close eye on Quebecor stock’s ability to manage and reduce this debt over time, as it will significantly impact the company’s financial flexibility and valuation.

Market conditions also warrant consideration. While Quebecor operates in relatively defensive industries like telecommunications and media, the broader economic environment could impact its performance. The company’s third-quarter 2024 results showed a slight year-over-year decline in revenue growth of 1.8% and a 9.7% drop in quarterly earnings growth. This may indicate some near-term challenges.

Yet Quebecor stock’s valuation metrics paint a picture of a reasonably priced stock. Its trailing price-to-earnings (P/E) ratio is 9.93, and its forward P/E is slightly lower at 9.35, suggesting that the market anticipates earnings stability or modest growth. The enterprise value-to-EBITDA ratio of 6.56 also suggests that the stock is attractively valued relative to its peers. Compared to other Canadian telecom players, Quebecor offers a compelling mix of growth potential and a lower valuation.

Looking ahead

The company’s strategic focus remains a key strength. Quebecor stock continues to emphasize market expansion and innovation in its telecommunications offerings. The Freedom Mobile acquisition has allowed it to challenge larger players, providing consumers with more competitive pricing and services. This aggressive growth strategy could yield significant long-term benefits, though it also comes with execution risks.

For investors, Quebecor stock’s risk-reward profile ultimately depends on their investment objectives and risk tolerance. Income-focused investors may find the 4.22% dividend yield highly appealing, especially given the company’s stable cash flow. Growth-oriented investors might view the stock as a buy, given its expansion potential and the favourable analyst outlook. However, conservative investors may prefer to wait for signs of debt reduction or improved earnings growth before committing more capital.

Bottom line

In conclusion, Quebecor could be a “buy” for investors who are comfortable with its debt levels and are seeking exposure to a strong, diversified Canadian telecom and media company with significant upside potential. For those with a lower risk tolerance, it may be prudent to adopt a “hold” stance, waiting for further clarity on debt management and sustained revenue growth. As always, potential investors should conduct their due diligence and consider consulting a financial advisor to ensure that Quebecor stock aligns with their broader portfolio strategy.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Buy These Canadian Dividend Stocks for Safe Monthly Income

Do you want to earn some steady monthly income? These three REITs are a good bet if you want safe,…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Got $7,000? 4 Quality Stocks to Buy and Hold Forever in a TFSA

These four Canadian stocks are some of the best businesses you can buy, making them ideal long-term investments for your…

Read more »

Piggy bank and Canadian coins
Dividend Stocks

How to Use Your TFSA to Earn $227 Per Month in Tax-Free Income

These TSX dividend stocks offer high yields and monthly payouts. These stocks can help you earn over $227 in tax-free…

Read more »

man shops in a drugstore
Dividend Stocks

Got $3,500? 5 Consumer Stocks to Buy and Hold Forever

Five consumer staple stocks are suitable long-term holdings for their defensive qualities.

Read more »

coins jump into piggy bank
Dividend Stocks

Don’t Watch Your Savings Shrink: 2 Dividend Stocks to Help Pay the Bills

Canadians can protect their savings by investing in high-quality dividend stocks that pay out "sufficient high" but safe dividends.

Read more »

dividends can compound over time
Dividend Stocks

TFSA: 4 Canadian Stocks to Buy and Hold Forever

These four top TFSA stocks not only pay dividends but also offer strong long-term upside potential.

Read more »

Hourglass and stock price chart
Dividend Stocks

Outlook for Nutrien Stock in 2025

Nutrien stock has gone through a rough patch, but that could mean there is value to be found.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

2 Affordable TSX Stocks That Pay Monthly Dividends

Two affordable, high-yield TSX stocks pay consistent monthly dividends.

Read more »