BT’s share price has fallen to 170p. Here’s why I’m still not buying

first_imgBT’s share price has fallen to 170p. Here’s why I’m still not buying BT’s (LSE: BT.A) share price just continues to fall. This time last year, the FTSE 100 stock was trading at around 235p. Today, though, the shares are changing hands for around 170p.From a value investing perspective, BT certainly stands out right now. As a result of its share price fall, the stock currently trades on a rock-bottom forward-looking P/E ratio of just 7.2 – less than half the median FTSE 100 P/E of 15.4 – and sports a dividend yield of a huge 9%. However, I’m still not tempted to invest in the telecommunications giant. Here are a few reasons why.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Poor financial performanceMy first issue with BT is the group’s financial performance has been pretty poor recently. Just look at the company’s half-year results in late October – adjusted revenue fell 2%, adjusted EBITDA declined 3%, and normalised cash flow tanked 38%. The interim dividend was also held flat at 4.62p per share. I’d want to see some signs performance is improving before investing in the company.Balance sheet problemsAnother issue is BT’s balance sheet – it doesn’t look good. For example, at 30 September, net debt stood at £18.3bn. By contrast, equity on the balance sheet was £10.3bn and the company’s market-cap is currently about £16.9bn. There’s also a monster pension deficit on the books. This is concerning, to my mind, as highly-leveraged companies can be vulnerable in an economic downturn. Given that we could be towards the end of the current economic cycle, I think investing in BT right now is a risky move.Dividend cut riskI also remain convinced BT’s dividend is at risk of a cut in the near term. The fact the yield has risen to nearly 9% suggests the market shares the same view.One red flag here is the fact the full-year dividend payout has been held flat at 15.4p per share for a few years now. This pattern often precedes a cut. It’s also worth noting the consensus dividend forecast for the year ending 31 March 2021 is 12.2p per share. In other words, many analysts believe a cut is on the horizon.Given the company’s large debt pile, its huge pension deficit, and its increasing capital expenditures, I wouldn’t be surprised at all if BT’s dividend payout was cut.The trend is not your friendFinally, from a technical analysis point of view, the share price trend here remains down. As my colleague Kevin Godbold recently pointed out, shares are more likely to continue a trend than they are to reverse direction. So, right now, investing just doesn’t seem wise.Of course, at some stage in the future, BT could turn things around and see an increase in its share price. However, given the company’s lack of momentum at present, I think there are much better FTSE 100 stocks to buy at the moment. Edward Sheldon, CFA | Tuesday, 28th January, 2020 | More on: BT-A Enter Your Email Address I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Image source: Getty Images. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!center_img “This Stock Could Be Like Buying Amazon in 1997” Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Edward Sheldon has no position in any shares mentioned. 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. See all posts by Edward Sheldon, CFA Simply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shareslast_img

Leave a Reply

Your email address will not be published. Required fields are marked *