At US$17.97, Is Telephone and Data Systems, Inc. (NYSE:TDS) Worth Looking At Closely?

While Telephone and Data Systems, Inc. (NYSE:TDS) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$21.12 at one point, and dropping to the lows of US$16.52. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Telephone and Data Systems' current trading price of US$17.97 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Telephone and Data Systems’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Telephone and Data Systems

Is Telephone and Data Systems Still Cheap?

Telephone and Data Systems appears to be overvalued by 29% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$17.97 on the market compared to our intrinsic value of $13.91. Not the best news for investors looking to buy! Another thing to keep in mind is that Telephone and Data Systems’s share price is quite stable relative to 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.

What does the future of Telephone and Data Systems 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. Though in the case of Telephone and Data Systems, it is expected to deliver a relatively unexciting earnings growth of 5.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in TDS’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe TDS should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 TDS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Telephone and Data Systems at this point in time. Our analysis shows 3 warning signs for Telephone and Data Systems (2 are a bit concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Telephone and Data Systems, 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.