TPG Telecom Limited (ASX:TPM), a telecom company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine TPG Telecom’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for TPG Telecom
Is TPG Telecom still cheap?Great news for investors – TPG Telecom is still trading at a fairly cheap price. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.45x is currently well-below the industry average of 21.02x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that TPG Telecom’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from TPG Telecom?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for TPG Telecom, at least in the near future.
What this means for you:
Are you a shareholder? Although TPM is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to TPM, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on TPM for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on TPG Telecom. You can find everything you need to know about TPG Telecom in the latest infographic research report. If you are no longer interested in TPG Telecom, you can use our free platform to see my list of over 50 other stocks with a high growth potential.