The BT Group plc (LON:BT.A) (BT.A.L) share price has risen from around 203p in May to its current price level of 260p. That’s a strong return over a six-month time period in my view – particularly since the FTSE 100 has recorded volatile performance during the same period.
Of course, the telecoms company started from a relatively low base. Even after its 28% rise, it has a P/E ratio of around 10 at the moment. This is one of the lowest P/E ratios that I can find in the FTSE 100 at the moment, and suggests that investors remain cautious about its investment prospects.
That’s understandable in my opinion. BT faces a period of significant change that could cause a substantial amount of instability for its stock price. For instance, its most recent quarterly update showed that it has cut 2,000 roles from its business during the last three months. Further headcount reductions are planned, with the company seeking to reduce costs as it aims to improve its financial performance over the medium term.
Alongside this, the company has a CEO who is set to depart in the New Year. His replacement may seek to make further changes to its business model in my view, and this could have an impact on investor sentiment in the short run.
In terms of its recovery, I believe there is a long way to go until the business is delivering on its potential. BT is forecast to post further declines in EPS in the next couple of years, and this could provide evidence that a turnaround in performance is needed.
With the company having what I believe is the potential to improve its profitability, I think it has long-term turnaround potential. In the short run, though, I wouldn’t be surprised if volatility and risks remain high as it seeks to deliver a successful recovery.