Shares in BT Group (LSE: BT-A) are among the mostly widely owned in the UK. They are also heavily traded each day on the London Stock Exchange. But BT shares have drifted sideways over the past 12 months. What’s more, they have crashed by almost two-fifths over the past half-decade. So is this popular FTSE 100 stock cheap or not?
The decline of the BT share price
Long-suffering BT shareholders will know the former telecoms monopoly’s shares have been in long-term decline. In late November 2015, the shares were riding high at around £5. But the stock has never seen such heights again. Indeed, it fell to a lifetime low of 94.68p on 3 August 2020, during the Covid-19 crisis. Here’s how BT shares have performed over seven different timescales:
| One day | 1.9% |
| Five days | 0.8% |
| One month | -2.4% |
| 2022 YTD | 6.5% |
| Six months | -5.0% |
| One year | -1.7% |
| Five years | -41.8% |
Despite a fair amount of zigzagging, the BT share price is down less than 2% over the past 12 months. However, it has crumbled since mid-2017, losing almost 42% of its value. Yuk.
Does this FTSE 100 stock look cheap today?
BT has been in the news this month, but for the wrong reasons. On 13 July, UK competition regulator, the Competition and Markets Authority (CMA), launched a wage-fixing probe into BT and other leading broadcasters. The CMA is investigating whether the groups colluded to fix rates of pay for freelance broadcast workers.
Also, the telecoms firm is set to join the UK’s ‘summer of strikes’. Almost 40,000 BT staff who are members of the Communication Workers Union will strike on 29 July and 1 August over a disputed pay deal. This will be the first strike among BT staff for 35 years.
Another problem for BT is that it has a hefty pension deficit and huge debt pile, while its revenues and earnings have declined for years. Also, the group faces huge capital expenditure in rolling out high-speed broadband UK-wide. However, the firm is successfully trimming costs to improve cash flow.
Here are BT shares’ current fundamentals, which look fairly undemanding to me:
| Share price | 180.6p |
| 52-week high | 201.4p |
| 52-week low | 134.85p |
| Market value | £17.9bn |
| Price-to-earnings ratio | 14.4 |
| Earnings yield | 7.0% |
| Dividend yield | 4.3% |
| Dividend cover | 1.6 |
BT’s trailing (backward-looking) earnings yield of 7% is a percentage point higher than the FTSE 100’s 6% yield, so its stock is ‘cheaper’ than the wider market. Also, having restored its cash dividend at 7.7p a share, the group’s cash yield is slightly ahead of the Footsie’s 4% a year.
Would I buy BT today?
Though I see value characteristics in BT stock, I struggle to see how the share price will break out of its current range and head above and beyond, say, £2. But perhaps French–Israeli billionaire businessman Patrick Drahi might increase his stake in BT beyond his current 18% holding, for which he paid around £3.2bn?
Summing up, I’m quite tempted to take a punt on BT’s future recovery. That said, I would not buy shares in BT at their current levels right now. But that’s purely because I see much deeper value lurking elsewhere in the FTSE 100 and FTSE 250 indices!
