Is BT one of the best stocks to buy now?

When it comes to finding the best stocks to buy now, I can see why some investors might ignore blue-chips. FTSE 100 equities like BT (LSE: BT.A) are lumbering giants. It seems unlikely they will be able to achieve the sort of growth and potential returns investors could receive by investing in smaller businesses. 

I think this is true, but only to a certain extent. Smaller companies might have more growth potential. However, they can also be far riskier and more challenging to understand. 

What’s more, blue-chip stocks are also more susceptible to market sentiment. I have lost count of the number of times I have seen shares in a high-quality FTSE 100 company slump even though it is still growing and returning cash to investors. If the City decides it does not like a blue-chip, the market’s punishment can be relentless. 

For long-term investors, I think this can lead to some fantastic opportunities. And this is precisely the situation that I am seeing with BT right now. 

One of the best stocks to buy now

When I have covered BT in the past couple of months, I have always noted that the company is in the middle of a transition. It is trying to grow its way out of a self-induced slump.

For years the enterprise had failed to invest enough in its operations to maintain a consistent level of customer service. Management is trying to reverse this trend and its efforts appear to be yielding results. 

According to the company’s third-quarter results, published at the end of last week, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased 2% for the nine months to the end of December compared to the prior-year period. 

BT’s EBITDA from its consumer business is, in my opinion, the most critical number in the release. This is by far the most prominent business division, accounting for nearly 50% of adjusted revenues. Overall, adjusted EBITDA in the consumer business increased 6% year on year for the nine-month period. 

Lower income from BT’s Global and Enterprise businesses helped push down the overall group EBITDA. 

BT share price progress 

I think these figures show that the company is making headway. Consumers are clearly associating with its revitalised offering of fibre broadband and 5G connectivity (via BT-owned mobile network EE). This is driving growth across the business, even though spending is significantly higher. Capital expenditure increased 24% during the period. 

These figures are impressive, but they are not perfect. The firm is still spending a lot of money building out its fibre network. This is restricting its ability to reduce overall net debt, which actually increased by £447m in the nine months to the end of December. As interest rates begin to rise, rising borrowing levels could become a serious issue for the enterprise. 

Despite this risk, I think BT’s latest figures explain why this is one of the best stocks to buy now as a growth and income play. The stock is trading at a relatively undemanding forward price-to-earnings (P/E) multiple of just 10 and could support a potential dividend yield of 3.9% this year.

Considering these metrics and the firm’s improving outlook, I would be happy to buy BT for my portfolio today.