Valued at a market cap of almost $29 billion, TELUS (TSX: T) is among the most popular stocks in Canada. In recent years, the Canada-based telecom giant has underperformed the broader markets by a significant margin.
Debt concerns, a competitive wireless market in Canada, and a general rotation away from yield-heavy names have weighed on shares. But strip away the noise, and the numbers tell a more interesting story.
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TELUS is more than just a phone company
Most people think of TELUS as a Canadian wireless carrier. But the company has been quietly building two high-growth businesses alongside its core telecom operations.
TELUS Health is now one of the largest workforce well-being platforms in the world. It covers more than 161 million lives across 200 countries. Its clients include over 50% of the Fortune 500. The platform handles mental health support, employee assistance programs, primary care software, and more. It’s an AI-driven, subscription-based business, and it’s growing fast.
TELUS CEO Darren Entwistle said the Health division delivered double-digit growth in revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter of 2025. He confirmed the company expects double-digit EBITDA growth again in 2026 for both TELUS Health and TELUS Digital, the company’s AI and customer experience arm.
“We’ve got double-digit growth coming from TELUS Digital. We’ve got double-digit growth coming from TELUS Health,” Entwistle said during the earnings call. “I think that provides a robust story.”
The free cash flow case is compelling
Here’s where it gets interesting for investors.
TELUS generated $2.2 billion in FCF in 2025, an 11% increase over 2024. That follows 12% FCF growth in 2024 and 38% growth in 2023. Management is guiding for approximately $2.45 billion in FCF for 2026, roughly another 10% increase.
Analyst estimates shown on TIKR project FCF reaching approximately $2.70 billion in 2027 and $3.4 billion in 2030. That’s a compound annual growth rate (CAGR) of about 8% through 2030.
Now look at the valuation. The NTM (next 12 months) market cap-to-FCF multiple currently sits around 11.8 times, near a 10-year low. The 10-year mean for this ratio is 21.1 times, with a high of 42 times during the pandemic boom.
Even a modest reversion to the mean, say, back to 15 times NTM FCF, would imply meaningful upside from current levels. Applying a 15 times multiple to $3.4 billion in estimated 2030 FCF, and you get a market cap in the range of $51 billion.
That’s 80% above where the TSX dividend stock sits today. If we account for dividend reinvestments, cumulative returns could surpass 100% over the next three years.
That’s not a guarantee. It’s a scenario. But it shows how much compression is already baked into the current price.
Debt is the real risk investors need to watch
TELUS isn’t without challenges. The company carries a significant debt load, with a net debt-to-EBITDA leverage ratio that ended 2025 at 3.4 times. Management is targeting 3.3 times or lower by the end of 2026 and three times by the end of 2027.
They’re actively working to get there, which includes selling assets, monetizing real estate and copper infrastructure, and exploring strategic investors for both TELUS Health and TELUS Agriculture. Notably, TELUS has set a $7 billion target for asset monetization.
The dividend, meanwhile, is being held steady. Management has been clear that it won’t resume dividend growth until deleveraging is on track and the dividend-reinvestment plan discount is removed.
The Foolish takeaway
TELUS is a turnaround story layered on top of a steady telecom business. If management executes on its FCF targets and the valuation multiple simply normalizes, the next three years could look very different from the last three.
