Over the last year, shares in BT (LSE: BT-A) have posted impressive gains of 13.5%, as the company has continued its push to become a quad play operator. In fact, BT’s strategy of winning new customers via an aggressive broadband pricing strategy, which includes free access to BT Sport, has meant that the company has easily beaten its rivals when it comes to sales of superfast broadband in particular. This, it is envisaged, will provide BT with a relatively large customer base through which to cross-sell its other products, including the planned integration of the EE mobile network.
Looking Ahead
Despite its impressive share price growth, BT continues to offer excellent value for money. For example, it trades on a price to earnings (P/E) ratio of 15.1, which is less than the FTSE 100‘s P/E ratio of around 16 and shows that there is still rerating potential over the medium term. And, with BT forecast to grow its bottom line at a faster pace than the wider index (due largely to its expected takeover of EE and the subsequent cross-selling opportunities), it could prove to be a sound investment at the present time.
Sector Peers
However, BT is clearly not perfect. It continues to have a vast pension liability, a balance sheet that is somewhat shaky (and which will likely require a rights issue if the EE deal comes off), while its price to earnings growth (PEG) ratio of 2.1 hardly makes it an enticing growth play over the next couple of years. In other words, while BT has excellent long term potential, its short term progress may be somewhat challenging.
With that in mind, it could be worth looking at some of BT’s sector peers. Notable among them is TalkTalk (LSE: TALK), which is already a quad play provider and has stunning growth prospects. For example, it is forecast to increase its bottom line by 69% next year, and by a further 38% in the year after. And, with TalkTalk having a P/E ratio of 20.1, this translates to a PEG ratio of just 0.3, which indicates that TalkTalk’s shares could move significantly higher.
In fact, it’s a similar story with three of BT’s other sector peers. For example, Telecom Plus (TEP) may have had an awful year, with its shares being down 43%, but it is expected to increase its net profit by 10% next year and 23% the year after. This puts it on a PEG ratio of just 0.5, which makes its shares rather appealing at the present time.
Furthermore, Cable & Wireless Communications (LSE: CWC) and Colt (LSE: COLT) also offer growth at a very reasonable price. For example, they have upbeat growth prospects and trade on PEG ratios of just 0.4 and 0.6 respectively – both of which are significantly more appealing than BT’s PEG ratio and make them more enticing growth stocks.
A Strong Sector
So, while BT is an attractive stock to buy at the present time, the telecoms sector has a number of other top quality growth plays that are worth considering ahead of it. Certainly, they do not offer the size, scale and stability of BT, but their share prices could turn the tables and, unlike in the last year, outperform BT moving forward.