At the same time BT (LSE: BT.A) reported a 51% decline in third quarter in net profits as a result of the Italian business write-down.
Compounding the issue BT warned revenue for the current financial year would be flat, operating profit will deteriorate and forecasts for sales and profit up to 2018 will also be flat and at the time BT’s pension deficit was £9.6 billion.
So this week’s news that BT has been fined a record £42 million after Ofcom had found that it has been very naughty indeed interested me since BT has been on my watch list and I generally like to look through stock market carnage, chaos and mayhem to see if I can sniff out a bargain.
BT appears to be stumbling from one crisis to the next almost as if they want to clear the decks of bad news now ahead of reporting bad numbers for the rest of the year as per their previous warning.
You can’t blame them really as lots of companies do this sort of thing – but is BT a relatively unpopular company?
Is BT A Bargain With A Margin Of Safety?
If BT turns out to be a bargain then I’ll certainly consider it for this months allocation towards my SIPP.
It does not turn up on my bespoke Relatively Unpopular large Company screen but that does not preclude it from investment.
Lets get to the numbers:
- PE Ratio: 10.78
- Yield: 4.00%
- PE 5: 12.56
- Discount to PE 5: 14.17%
- Dividend growth % (2012-16): 13.79, 15.15, 13.16, 19.38, 9.87
- ROCE (2012-16): 21.43, 20.58, 21.96, 20.84, 21.59
- Profit margin (2012-16): 11.00, 12.47, 14.17, 15.98, 17.04
- Reported EPS growth% (2012-16): 31.89, -2.87, 3.38, 6.53, 13.41
To get a real sense of BT’s operating business check out it’s regulatory news announcements.
The share price reached a peak of 500p at the end of November 2015 and has fallen to 322p – a decline of over 35%.
Such a price decline places BT stock in bear market territory and the bad news is already priced into the stock.
The numbers point to a steady and stable business that is going through a period of unpopularity but the margin of safety is small so for now BT will stay on my watch list.
Besides I’m confident that I’ve found an alternative stock that has a large enough margin of safety for me to make an investment in this month following my retirement investing strategy.
I’ll be sure to post details of this alternative stock and why I’m happy to make an investment this month.