Is Telephone and Data Systems, Inc. (NYSE:TDS) Potentially Undervalued?

Telephone and Data Systems, Inc. (NYSE:TDS), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Telephone and Data Systems’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Telephone and Data Systems

What's The Opportunity In Telephone and Data Systems?

According to my valuation model, Telephone and Data Systems seems to be fairly priced at around 19% below my intrinsic value, which means if you buy Telephone and Data Systems today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $13.32, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Telephone and Data Systems’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Telephone and Data Systems look like?

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. Though in the case of Telephone and Data Systems, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? TDS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TDS for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on TDS should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Telephone and Data Systems at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Telephone and Data Systems.

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.