Telstra Ltd [ASX:TLS] traded 1.79% lower today, to $4.39 per share. But the slump is nothing compared to Telstra’s recent track record.
Had you invest in Telstra at the start of this year, you’d have lost 14% on your investment. Had you jumped in a year ago, you’d be down 23%. Not great news if all you bought Telstra for was the dividends.
But has the stock fallen to a point where it’s an attractive investment?
Is Telstra a value trap?
Telstra is your regular blue-chip stock. It makes profits, and it’s too big to fail. Right?
You can quickly lose a lot, if not all, of your investment thinking this way. Instead of just guessing, take a look at their financials.
Revenues have remained flat for the last five years. Earnings have been volatile. And analysts are predicting that earnings per share for the big telco will decline.
If you check out their balance sheet, current assets have gone nowhere in the last five years, while debt has increased. To Telstra’s credit, they have managed to grow retained earnings 58.2% from 2012–16.
Yet, with earnings in decline, it’s probably wiser to pay out earnings to shareholder than to invest in low-returning activities.
What now for the Telstra Share Price?
While Telstra is trading at an attractive price, I’d suggest you look at alternative investments. The company’s future prospects are surrounded by uncertainty. It’s also difficult to predict what regulators are going to do next in the industry.
Junior Analyst, Money Morning
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