Is the BT Group plc share price ripe for further gains?

Could BT Group plc (LON:BT.A) (BT.A.L) deliver improving investment performance?

BT Group plc
BT Group plc

The prospects for the BT Group plc (LON:BT.A) (BT.A.L) share price appear to be relatively uncertain in my view. The company is in the process of changing its strategy, with 2,000 roles made redundant in the most recent quarter. Alongside this, a new CEO is due to start work in the New Year. This could cause further instability in my opinion – particularly if further strategy changes are ahead.

One of the key challenges facing the company in my view, though, is its lack of profitability over recent years. Although it has spent a significant sum on things such as the EE acquisition, sports rights and pay-tv, it has yet to deliver a substantial improvement in financial performance.

In fact, in the last three years BT has recorded three successive years of profit declines. At a time when many of its TMT peers have been able to generate rising EPS, I think this is disappointing. And since further falls in EPS are due in the next two years, I feel that the stock could lack a clear catalyst to push its share price higher at the moment.

As a result, I believe there could be further uncertainty ahead for the business. Investors may remain cautious, and its P/E ratio of around 10 may suggest that it is fairly valued at the moment, given its financial outlook.

In the long run, I believe that the BT share price could move higher. The company appears to be in a strong position relative to peers in my view, and I feel that it now has the right strategy to become more efficient, flexible and, ultimately, more profitable.

As a result of this and its current valuation, I’m cautiously optimistic about its prospects over future years. However, in the near term I feel that continued volatility may be ahead for the stock in an uncertain FTSE 100.

About Robert Stephens 5430 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 or use one of the other contact methods available on the 'Contact Us' page