Why TELUS International (Cda) Inc. (NYSE:TIXT) Could Be Worth Watching

While TELUS International (Cda) Inc. (NYSE:TIXT) might not have the largest market cap around , it saw a decent share price growth of 15% on the NYSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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? Today we will analyse the most recent data on TELUS International (Cda)’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for TELUS International (Cda)

Is TELUS International (Cda) Still Cheap?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that TELUS International (Cda)’s ratio of 42.35x is above its peer average of 25.91x, which suggests the stock is trading at a higher price compared to the Professional Services industry. Another thing to keep in mind is that TELUS International (Cda)’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 the levels of its industry peers 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 for it to fall back down into an attractive buying range again.

What does the future of TELUS International (Cda) look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. TELUS International (Cda)'s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? TIXT’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe TIXT should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TIXT for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for TIXT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into TELUS International (Cda), you'd also look into what risks it is currently facing. Be aware that TELUS International (Cda) is showing 4 warning signs in our investment analysis and 1 of those is a bit unpleasant...

If you are no longer interested in TELUS International (Cda), you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.