At US$34.01, Is It Time To Put Telephone and Data Systems, Inc. (NYSE:TDS) On Your Watch List?

Telephone and Data Systems, Inc. (NYSE:TDS), is not the largest company out there, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. As a US$3.9b market-cap stock, it seems odd Telephone and Data Systems is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Telephone and Data Systems’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Telephone and Data Systems

Is Telephone and Data Systems Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 12.19% above our intrinsic value, which means if you buy Telephone and Data Systems today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $30.32, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Telephone and Data Systems has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Telephone and Data Systems?

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. With profit expected to grow by 97% over the next couple of years, the future seems bright for Telephone and Data Systems. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? TDS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on TDS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Telephone and Data Systems, and understanding this should be part of your investment process.

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.