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FTSE utilities supplier Telecom Plus (LSE: TEP) has drifted 12% decrease from its 24 June 12-month excessive of £21. This appears to have resulted from a drop in revenues in its 24 June full fiscal 12 months 2025 outcomes, to £1.838bn from £2.039bn. I additionally suppose it comes from profit-taking after a bullish value run since February.
In any other case, 2025 noticed a file adjusted pre-tax revenue of £126.3m. This marked an 8.1% year-on-year improve, whereas adjusted earnings per share rose 9.4% to 119.2p.
These outcomes enabled the agency to extend its dividend by 13.3% to 94p per share – one other file.
Cellular companies are simply one of many Telecom Plus 5 principal companies, which all fall below the buying and selling identify ‘Utility Warehouse’. The others are vitality, broadband, insurance coverage, and cashback playing cards.
The corporate expects one other 15% progress in buyer numbers in 2026. It’s concentrating on two million prospects and extra over the subsequent three years. And it forecasts adjusted pre-tax revenue to be inside a variety of £132m-£138m.
So how’s the share valuation wanting?
There’s a distinction between a inventory’s value and its worth. The previous is regardless of the market can pay for it at any level, whereas the latter displays underlying enterprise fundamentals.
In my expertise, with the ability to precisely quantify this price-value hole is the important thing to huge long-term income. This expertise contains a number of years as a senior funding banker and many years as a non-public investor.
The most effective methodology I’ve discovered to do that is discounted money move (DCF) evaluation. This identifies the place any inventory value must be, derived from money move forecasts for the underlying enterprise.
The DCF for Telecom Plus reveals it’s 31% undervalued at its present £18.57 value.
Due to this fact, its truthful worth is £26.91.
A threat right here is that its earnings – which energy any agency’s share value and dividends – will probably be affected by intense competitors in its markets.
Nevertheless, consensus analysts’ forecasts are that Telecom Plus’ earnings will develop by 8.3% a 12 months to finish fiscal-year 2028.
A excessive dividend set to go larger
The inventory at present pays a dividend of 5.1%. Nevertheless, analysts forecast this may rise to five.6%, this 12 months, 6.1% subsequent 12 months, and 6.5% in 2027.
So, buyers contemplating a holding of £11,000 (the common UK financial savings) within the inventory would make £10,034 after 10 years.
That is based mostly on a median 6.5% yield and on ‘dividend compounding’ getting used.
After 30 years on the identical foundation, this could rise to £65,910. By that stage, the entire worth of the Telecom Plus holding could be price £76,910.
And that may pay £4,999 a 12 months in dividend earnings at that stage!
Will I purchase the inventory?
My general portfolio is properly balanced proper now with a mixture of high progress and dividend shares.
And I’m of the ‘if it ain’t broke, don’t repair it’ view of investing.
Nevertheless, if any of my progress or dividend shares began underperforming, Telecom Plus could be a number one contender to fill the spot.
