TU
TELUS Corporation
$12.49
Leveraged Infrastructure
80%
EV/EBITDA × Telecom Multiple
Mild
·
Conviction
Fair Value
Trading 7.9% below fair value
You pay
$12.49
Bear
$9.17
Fair
$13.57
Bull
$17.96
Bear
$9.17
-26.6%
EBITDA $5B × 6.4x − $21B debt
Fair
$13.57
+8.6%
EBITDA $5B × 7.5x − $21B debt
Bull
$17.96
+43.8%
EBITDA $5B × 8.5x − $21B debt
Key Value Driver
EV/EBITDA multiple (7.5x) vs. 4.2× leverage
Implied Market Multiple
8.1x
Summary
Our base-case estimate uses EV/EBITDA × Telecom Multiple. We then blend that result with the average analyst price target of $22.59 from 23 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $13.57 per share.
Warnings
Debt is 4.2x annual operating profit. Because the company carries so much debt, even small shifts in business value cause big swings in the stock price.
We value this business based on total operating profit relative to total enterprise value (debt + equity). Profit-per-share metrics are unreliable when debt makes up most of the company's value.
Wall Street's average price target is $22.59 (from 23 analysts). Our estimate is 53% below the consensus -- consider that gap carefully.
Financial statements were converted from CAD into USD using USDCAD at 0.7240 USD per CAD.
Key Risks
- Debt refinancing at higher rates compresses equity value quickly
- EBITDA flatters — capex, interest, and taxes eat the cash flow
- Cord-cutting and wireless substitution are structural headwinds for cable