Skip to main content

Michelle Siu/The Globe and Mail

Mr. Bowman is a portfolio manager at Wickham Investment Counsel Inc. michael@wickhaminvestments.com

What are we looking for?

Where our biggest Canadian telecommunications companies rank among those in the rest of the world.

Story continues below advertisement

The screen

My colleague Rob Belanger and I ranked all these companies based on the price-earnings ratio. The P/E ratio is the most common and widely used valuation metric in security analysis.

We also looked for a minimum dividend yield of 2 per cent, and free cash flow of over $250-million (U.S.). The latter indicates that a company has enough cash to buy back stock, pay dividends or reduce its debt. Searching for companies that have high or improving cash flows, but undervalued share prices, can be very profitable.

All of these companies have a market cap of over $1-billion, and a debt-to-equity ratio of less than 1.5. We usually prefer low debt-to-equity ratios because the companies are then better protected in the event of a business decline. (A high ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations.)

However, low ratios may show that a company is not taking advantage of the increased profits that financial leverage may bring.

Since earnings per share growth is one of the most important indicators of a company's health, and management's performance, we thought it beneficial to show only those companies that had a positive earnings per share growth over the past five years.

What did we find?

Story continues below advertisement

While BCE Inc. and Telus Corp. didn't shoot the lights out in any one category, both were quite acceptable, especially when you consider some of the world's largest telecom companies, such as BT Group PLC, China Mobile and Vodafone Group, didn't even make the list.

Both our Canadian companies were slightly above the median P/E ratio, and also above the average debt-to-equity ratio, yet still well within the acceptable limits.

If you are considering adding BCE or Telus to your portfolio you can be certain that both of them score very well when compared to other similar companies around the world.

Report an error
About the Author
Portfolio Manager

Michael Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high net worth clients. Mr. Bowman has 30 years experience as an investment adviser and financial planner serving both individual and corporate accounts. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.