The BT Group plc (LON:BT.A) (BT.A.L) share price is relatively cheap in my view. It has a P/E ratio of less than 10, which suggests to me that it may offer a margin of safety.
The FTSE 100 company, though, faces an uncertain near-term future in my opinion. It is in the process of replacing its CEO, with a new CEO expected to assume the position within the next few weeks.
It is also set to implement its updated strategy, which could cause some instability and uncertainty due in part to the scale of change which is taking place. It is making a large number of posts redundant, with its most recent investor update suggesting that this is progressing as planned. A new CEO may even decide that the company needs to further refine its plans, and this could cause additional upheaval after a number of years of significant change for the business.
Therefore, since value is based on more than just price, I feel that BT may not be as appealing as a number of other FTSE 100 shares. Sure, it may have a lower valuation than many of its index peers. But with its EPS growth expected to be negative in the current year and next year, I feel that investors are right to demand a margin of safety at the moment.
In the long run, I’m optimistic about the prospect of a share price recovery. I’m upbeat about the current strategy being pursued. But at the same time I feel that BT faces a number of risks which could mean that its share price continues to be volatile in the near term. Therefore, it wouldn’t surprise me if the outperformance of the FTSE 100 which has been recorded in recent months fails to be repeated – in the short run at least.