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Globe Investor

Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

(Michelle Siu For The Globe and Mail)
(Michelle Siu For The Globe and Mail)

Number Cruncher

Calling all telecoms with value Add to ...

Mr. Bowman is a portfolio manager at Wickham Investment Counsel Inc. michael@wickhaminvestments.com

What are we looking for?

Where our biggest Canadian telecommunications companies rank among those in the rest of the world.

The screen

My colleague Rob Belanger and I ranked all these companies based on the price-earnings ratio. The P/E ratio is the most common and widely used valuation metric in security analysis.

We also looked for a minimum dividend yield of 2 per cent, and free cash flow of over $250-million (U.S.). The latter indicates that a company has enough cash to buy back stock, pay dividends or reduce its debt. Searching for companies that have high or improving cash flows, but undervalued share prices, can be very profitable.

All of these companies have a market cap of over $1-billion, and a debt-to-equity ratio of less than 1.5. We usually prefer low debt-to-equity ratios because the companies are then better protected in the event of a business decline. (A high ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations.)

However, low ratios may show that a company is not taking advantage of the increased profits that financial leverage may bring.

Since earnings per share growth is one of the most important indicators of a company’s health, and management’s performance, we thought it beneficial to show only those companies that had a positive earnings per share growth over the past five years.

What did we find?

While BCE Inc. and Telus Corp. didn’t shoot the lights out in any one category, both were quite acceptable, especially when you consider some of the world’s largest telecom companies, such as BT Group PLC, China Mobile and Vodafone Group, didn’t even make the list.

Both our Canadian companies were slightly above the median P/E ratio, and also above the average debt-to-equity ratio, yet still well within the acceptable limits.

If you are considering adding BCE or Telus to your portfolio you can be certain that both of them score very well when compared to other similar companies around the world.

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How BCE and Telus stack up globally

Company Ticker Country P/E
Telef Venezuela D Shs. TDV/D Venezuela 5.2
Etihad Etisalat EEC Saudi Arabia 8.5
Oman Telecom OTEL Oman 9
Freenet AG FNTN Germany 9.3
TDC A/S TDC Denmark 9.7
Mobile Telecom ZAIN Kuwait 9.9
Nippon Telegraph 9432 Japan 10.6
NTT Docomo 9437 Japan 11.3
Millicom Int'l Cellular MIICF Luxembourg 11.5
National Mobile NMTC Kuwait 11.7

All currency figures U.S. Source: Wickham Investment Counsel Inc., Bloomberg


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