The performance of the BT Group plc (LON:BT.A) (BT.A.L) share price has caught many investors by surprise in recent months. At a time when the FTSE 100 has fallen, it has delivered gains and is now trading at around 258p having been close to 200p around six months ago.
The stock, though, continues to have a large margin of safety in my view. It has a P/E ratio which is barely in the double digits, while its dividend yield continues to be well ahead of the FTSE 100’s. Both of these measures suggest to me that it may offer good value for money at the moment.
The future outlook for the business, though, could be relatively uncertain. It is expected to post further declines in EPS in spite of a major investment programme and strategy change being put into effect. Just last quarter, it made 2,000 job roles redundant, with more expected over future months. However, its financial outlook continues to be weak in comparison to its sector peers. And should the UK’s economic outlook deteriorate due to Brexit, its financial prospects could decline to some degree.
I believe that BT’s new CEO may seek to make changes to what I view as a relatively disappointing business in terms of its profit performance. Ultimately, it has sought to deliver growing profitability, but has failed to do so for the last three years and is expected to continue this trend in the next two years. And even though its shares have risen in recent months, investors may continue to adopt a cautious approach to its prospects through a large margin of safety.
Therefore, while I think the performance of BT could improve in the long run, I believe that its near-term prospects could be uncertain. It may experience further volatility in my opinion, with various changes potentially causing investors to remain uncertain about its investment appeal.