Can BT Group plc deliver long-term share price growth?

Does BT Group plc (LON:BT.A) (BT.A.L) have the capacity to post improving capital returns?

BT Group plc
BT Group plc

Having risen from 203p to around 250p in the second half of 2018, investors may be feeling optimistic about the prospects for BT Group plc (LON:BT.A) (BT.A.L). After all, the stock bucked the trend of the wider FTSE 100 in posting improving share price performance in the latter part of the year.

In 2019, the company could face a period of uncertainty in my view. Sure, there may be some momentum from last year. But with a new CEO set to take charge in the next few weeks, I believe there could be a period of further change ahead. From my experience, new CEOs often look to add value through making changes to a business. And with the company being less than a year into a revised strategy implementation, this could cause some volatility in the near term in my opinion.

Even though BT delivered strong share price growth in the second half of 2018, the company continues to have a P/E ratio of less than 10 at the moment. I feel this could mean that it offers a margin of safety and may be able to generate improving performance in the long run. I also think that a focus on cost reduction and improving its consumer division’s performance could be a worthwhile move in future years.

In the near term, though, the company is expected to post a fall in EPS. This would represent the fifth year of falling EPS according to my research, and may keep investor sentiment held back to some degree. That’s particularly the case since other TMT shares appear to be delivering improved financial prospects at the moment.

So, while 2019 could be an exciting year for BT and there may be long-term growth potential on offer, I’m still uncertain about its near-term prospects during a period of intense change for the business.

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