Just over three years ago, the BT Group plc (LON:BT.A) (BT.A.L) share price was trading at twice its current level. Even though it has risen by 50p since May, it is still 250p short of the 500p level it reached in November 2015.
During the last three years the company has experienced a hugely challenging period. It has released a profit warning, experienced accounting issues in Italy and failed to deliver improving profitability. In fact, EPS has declined in each of the last three years in spite of the company spending heavily in areas such as sports rights.
In my opinion, BT may have expanded too quickly. I understand that it has sought to become an increasingly dominant player in the quad play arena. I feel it has been successful in achieving this goal, with it having a strong presence in mobile following the EE acquisition. And, in time, I believe that it can make its enlarged business a success.
But, its renewed focus on costs and efficiency suggest to me that there is a significant amount of inefficiency within the business. In my opinion, it may have focused on size and sales, rather than zeroing-in on profitability and cash flow. The effect of this could have contributed to three years of declining profit and forecasts for two further years of falling EPS in future.
The refreshed strategy being put in place by BT seems to be resonating with investors. Its shares have risen in recent months. A new CEO may make further headway in improving the profitability of the business in my view. But I feel it will be a long and challenging process, and investor sentiment could remain cautious over a prolonged time period.
Therefore, while I feel there is a turnaround opportunity for the business, it may take longer than three years for it to move back to where it was in late 2015.