Having delivered capital growth of 27% in the last six months, it has clearly been a relatively successful period for BT Group plc (LON:BT.A) (BT.A.L).
Investors appear to be embracing its new strategy, with its most recent quarterly update suggesting that it is making progress in this area. For instance, 2,000 roles were made redundant as the company seeks to put in place a more flexible business model. This could help it to become increasingly competitive versus peers in what is a relatively crowded quad play industry in my view.
With a P/E ratio of around 10 even after its recent share price rise, I feel that BT could offer a margin of safety. This may help it to generate further share price growth in the long run, with investors still seemingly cautious even after its recent rise in market value.
In my view, investors could continue to be cautious in the near term. The company is, as mentioned, making changes to its business model. It is also set to welcome a new CEO in the New Year, while its financial prospects remain relatively downbeat over the next couple of years.
Therefore, its total return potential over future months could be limited by the potential risks it faces in my opinion. With potential instability as a result of significant change, as well as financial prospects that are a continuation of a trend of falling profitability over the last few years, there may be limited scope for a share price rise in the short run.
In future years, though, I feel that BT could deliver on its total return potential. It appears to have a dominant position in key markets, while its increasing focus on its consumer offering and cost cuts could lead to a stronger business. This may help it to deliver improving share price performance, but in the meantime there could be relatively high volatility ahead in my view.