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Does Telstra represent good value after its fall?

250817 TLS

Does Telstra represent good value after its fall?

Back in May, we noted that the Telstra (TLS) share price had fallen by more than 20 percent in the previous 12 months, and we asked whether good value might be on offer. At that time, we estimated the value of TLS shares to be in the region of $3.77 per share, and concluded that value was not compelling against a share price at the time of $4.42. Following its recent results announcement, TLS shares have fallen to a level close to our previous value estimate, and in a market where value generally is scarce, it makes sense to repeat the question: does TLS represent good value?

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Tim joined Montgomery as Head of Research and Portfolio Manager of The Montgomery Fund in July 2012. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Before joining Gresham Partners, Tim worked for McKinsey & Company for four years, where he was involved in strategic consulting in both Australia and Denmark.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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4 Comments

  1. TLS seems better established than other providers, and communications will always be a large part of the economy

  2. Does that valuation include any of the retained earnings going forward being invested at or near currant rates of ROE?

    • Hi Danny, we have estimated the rate at which the company can grow, and worked out from that the requirement for capital reinvestment based on historical rates of return, so in simple terms – yes. Given growth rates are low, capital requirements are fairly modest.

  3. Telstra’s share price 2008…… $4.40
    2017…… $3.95
    Really says it all,no share price growth over a decade,
    basically held as a bond like share because of the dividend
    now being deduced, really brings it back into the many to choose from basket.

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