Is BT Group plc worth more than 260p per share?

Could BT Group plc (LON:BT.A) (BT.A.L) offer upside potential?

BT Group plc
BT Group plc

With BT Group plc (LON:BT.A) (BT.A.L) trading at around 260p per share, I feel that the stock could offer a margin of safety at the moment.

That’s understandable in my view. The company faces an uncertain future according to my research, with strategy changes, falling EPS and a new CEO all ahead for the business over future months. At a time when investors are generally relatively nervous about the FTSE 100’s prospects, it does not surprise me that they may be factoring in potential difficulties for the business.

As with any company that makes major changes to its business model, I think that BT may be suffering from a degree of uncertainty regarding its outlook. It has been making changes to its structure for a number of years, with its most recent move being towards becoming more efficient.

In the most recent quarter, the company cut 2,000 roles, and this could help it to become increasingly efficient in my opinion. Alongside this, it is investing in its consumer division and this may boost its revenue over the long run.

As well as changes to its business model, the company is also set to have a new CEO in position in the New Year. Although he may seek to maintain the current, revised strategy, from my experience new CEOs often seek to make their own mark on the business. As a result, I wouldn’t be surprised if there are further changes ahead for the company’s strategy.

Of course, with BT expected to report as fall in EPS in the current year, investors may be factoring in further challenges from a financial perspective. As a result, a P/E ratio of around 10 may be understandable given the potential risks and uncertainty which the business faces. While I think there could be turnaround potential in the long run, in the near term I’m relatively cautious about the prospects for the stock compared to the wider FTSE 100.

About Robert Stephens 5151 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page