If you’re on the lookout for a Canadian stock that’s more affordable than it’s been in years, TELUS (TSX:T) might just be ringing your bell. As of writing, TELUS is trading at $20.50, reflecting an almost 13% dip from 52-week highs. So let’s get into why it might be a buy for today’s investors.
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Into earnings
In the third quarter of 2024, TELUS reported consolidated operating revenues of $5.1 billion, marking a 1.8% increase from the same period the previous year. Net income saw a significant boost, rising by 88%. All while earnings per share jumped by 111%. On an adjusted basis, both net income and earnings per share (EPS) increased by 11% and 12%, respectively. The Canadian stock also reported a 58% rise in consolidated free cash flow.
TELUS’s growth was driven by higher service revenue and income from its technology solutions segment. This includes mobile network, residential internet, TV, and security services. The Canadian stock also saw increased revenues from health services and agriculture and consumer goods services. However, these gains were partially offset by declines in its digital experience segment.
A further drop
Over the past year, TELUS’s stock has experienced a decline of approximately 10.3%, influenced by broader market challenges and sector-specific pressures. These include high interest rates and economic uncertainties. Despite these hurdles, TELUS has demonstrated resilience through superior revenue and dividend growth over the past five years. However, it’s worth noting that earnings growth has lagged. Showing a 47.4% decline in the same period, indicating underlying profitability concerns.
Looking ahead, TELUS is focusing on rejuvenating revenue growth, enhancing service quality, investing in talent, and embedding artificial intelligence (AI) capabilities into its processes and services. The Canadian stock has invested in additional sales capacity, advanced cross-selling, and service bundles. Plus, the telecom has intensified its value-added services positioning in response to heightened price competition. These efforts are starting to show promising results, with a robust sales funnel for AI-related opportunities driving continued sales momentum.
Showing value
Analysts have set expectations for TELUS’s Q4 2024 earnings, with some forecasting earnings of $0.21 per share for the quarter. The consensus estimate for TELUS’s full-year earnings is $1.23 per share. In terms of valuation, TELUS’s trailing price/earnings (P/E) ratio stands at 33.2, with a forward P/E of 20.5. The Canadian stock’s price-to-book ratio is 2, and it offers a dividend yield of approximately 7.7%, with a forward annual dividend rate of $1.61.
While TELUS faces challenges such as high debt levels and competitive pressures, its strategic investments in growth areas like digital health and AI-driven customer solutions position it well for future growth. The Canadian stock’s focus on enhancing service quality and expanding its digital capabilities could drive long-term value for shareholders.
Foolish takeaway
Altogether, TELUS’s current stock price presents a potential buying opportunity for investors seeking exposure to a stable Canadian telecommunications company – one with growth prospects in emerging sectors. As always, it’s essential to conduct thorough research and consider your individual investment objectives before making any investment decisions.
