Can the BT share price continue to rise?

The BT share price rose about 75% in the past year. Royston Roche makes a deep dive analysis of the stock.

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The BT (LSE: BT.A) share price rose about 75% in the past year. The company has been one of the best-performing stocks in the FTSE 100 index this year.

reviewed the company earlier this year. The stock is up around 40% since I purchased it for my portfolio. Here, I would like to analyse the company to decide whether to hold or sell my shares.

BT company’s fundamentals

BT’s fiscal year 2021 revenue fell 7% to £21.3bn. This was in line with the management’s estimates of the impact of Covid-19. Net profit dropped 15% to £1.47bn. The company’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) came at £7.4bn, which was in line with the management estimate of £7.3bn to £7.5bn. Overall, in my opinion, the financial results were good. 

Next, the company’s modernisation programme is progressing well. It delivered gross annualised savings of £764m in the first year with an associated cost of £438m. It has a target to save £2bn with an associated cost of £1.3bn over a period of five years.

The UK government has increased its investment focus in the telecom sector. Also, Ofcom recently published the outcome of the Wholesale Fixed Telecoms Market Review, which was in favour of the company. It will give the company greater regulatory certainty and confidence to earn a fair return on its Fibre to the Premises) investment. 

BT was also able to get an additional 5G spectrum for £475m. The price was lower than the previous estimates. So, the company was able to get a refund of £227m. This will help the company’s efficient rollout of 5G services and increased the cash available for investment.

BT is considering selling BT Sports. Since its launch in 2013, it has increased its visibility in homes and pubs. However, it has been a drag on the company’s profits. The move is aimed to focus on BT’s core telephone business and investments in the full-fibre and 5G networks. This, in my opinion, will also increase profits.

The BT share price – risks to consider

The company has a net financial debt of £11.7bn compared to £11.3bn at the end of March 2020. I think this debt is high for the company. It has a debt-to-equity ratio of 1.43. This is a bit of concern for me. 

The telecommunications markets are mature and highly competitive. This could put pressure on the company’s profits. It faces tough competition from Sky, Vodafone, and Virgin Media, among others. Not to mention the huge capital investments required to update with the latest technology. 

Final view

Taking all things into consideration, I think the positives outweigh the risks for the company. I believe that the BT share price will continue to rise and I have no plans to sell my shares today. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Roche owns shares in BT Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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