Is the BT Group plc share price cheap or expensive after its 25% rise in 6 months?

Does BT Group plc (LON:BT.A) (BT.A.L) offer improving financial prospects?


Having risen by 25% in the last six months, the BT Group plc (LON:BT.A) (BT.A.L) share price now has a P/E ratio of around 10. This may seem surprising to some investors, but the scale of its fall in recent years meant that it had a single-digit P/E ratio for an extended time period.

Clearly, investor sentiment remains relatively weak at the moment. Evidence of this can be seen in its rating in my opinion, which is among the lowest I can find in the FTSE 100. In future, I wouldn’t be surprised if there is further volatility ahead for the stock, since it is undergoing a number of different changes to fundamental parts of its business.

Among these are job cuts and a new CEO. In my view, the strategy shift could lead to improved financial performance in the long run, but there may be a period of uncertainty in the short run as the company implements the changes being made. However, with 2,000 job roles made redundant last quarter, the company’s cost base could shrink. This may help to make it more competitive versus industry peers.

Of course, if the FTSE 100 continues to experience a period of volatility, the BT share price could be hit relatively hard in my view. Investors who adopt a risk-off attitude may seek perceived lower-risk assets. Even though the stock has a fairly low P/E ratio compared to its index peers, its uncertain near-term outlook and falling EPS forecasts may lead to underperformance versus index peers that have more resilient outlooks.

As a result, I’m cautious about the near-term prospects for BT. I think it could experience further volatility, but with what seems to be a sound strategy and a new CEO set to arrive next year, I’m optimistic about its long-term investment potential.

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