Introduction
Hello everybody, Chuck Carnival here, co-founder of Fast Graphs—the fundamentals analyzer software tool. Today, I bring you another two-minute drill from our subscriber request series: Lessons in Valuation.
In this analysis, we’re taking a close look at Rogers Communications, a Canadian company with a strong income investment profile. Using Fast Graphs, I aim to illustrate how certain statistics can easily mislead investors unless thoroughly understood. As the saying goes:
"Statistics don't lie, but statisticians are often darn liars."
So, let’s dive into Rogers Communications and break down what makes this stock unique in today’s market.
Understanding the Fast Graphs
Let’s begin by stripping price off the graph to get an unbiased look at its fundamentals. Immediately, a few critical observations jump out:
- The company had a huge growth spurt between 2000 and 2013, with growth rates exceeding 43% annually.
- This period included individual years of 130% growth, 2,000% growth, and 67% growth, numbers that are simply unsustainable in the long run.
- Recent years, specifically from 2019 onward, show much lower growth—below 2% annually—which aligns more closely with the expected growth trajectory of wireless telecommunications companies.
That’s a crucial distinction—those aberrant high-growth years should be discounted, allowing us to focus on current, more sustainable trends for a clearer valuation.
Key Positives and Investment Potential
Price-to-Earnings (P/E) and Market Behavior
At present, Rogers Communications is trading at a blended P/E ratio of 7. Historically, the market has valued this company at anywhere between:
- 14x to 17x earnings, with occasional spikes to 19x or even 20x multiples.
The reason behind this valuation range likely revolves around its yield appeal.
Dividend Stability vs. Growth
One notable downside is that while the dividend yield remains attractive at 5.7%, dividend growth has been virtually non-existent.
- The dividend was frozen between 2015 and 2018, with another freeze since then.
- Investors expecting steady, increasing payouts might be disappointed, but those seeking high yields will find Rogers Communications a compelling option.
Another factor worth considering: the company carries significant debt, which is not uncommon for a wireless telecommunications provider.
Read More: 5 More stocks that may be better than RCI
| Company |
Symbol |
Why It's Better Than RCI |
| América Móvil |
AMX |
Larger global presence with stronger revenue growth and higher institutional ownership. |
| Chunghwa Telecom |
CHT |
More stable dividend yield and lower volatility, making it a defensive telecom play. |
| Vodafone Group |
VOD |
Higher dividend yield and broader international market exposure. |
| TELUS |
TU |
Stronger domestic market position in Canada with better customer satisfaction ratings. |
| Telefónica |
TEF |
More diversified revenue streams across Europe and Latin America, reducing risk. |
Future Forecast and Analyst Projections
Earnings Growth Expectations
Looking ahead, analysts project annual growth of around 2%, a conservative yet steady expectation. Over the last six months, these estimates have been revised downward, which may explain why the stock has become so cheap.
However, here’s where things get really interesting.
Potential Price Recovery and Returns
Using the Graham-Dodd formula, we draw the fair value line at a 12x multiple—which is calculated precisely at 11.93x earnings. If Rogers Communications simply returns to:
- A 12x P/E ratio, investors could see significant price expansion alongside dividend yield returns.
- At current levels, this equates to doubling your money within a year.
- Looking further out, returns could average:
- Over 40% through 2026.
- Nearly 28% through fiscal 2027.
If the market reverts to historical valuations, this stock could deliver exceptional gains over the next few years.
Conclusion
At today’s pricing, Rogers Communications presents a unique opportunity. While dividend growth remains stagnant, the current valuation disconnect suggests strong potential for capital appreciation.
Of course, further due diligence is necessary, but based purely on past financial metrics and forecasts, Rogers Communications appears to be:
- A great income stock with a high yield.
- A potential multi-year opportunity if valuations revert to historical norms.
If the stock moves back to just a 10x or 12x multiple, investors stand to make substantial gains over the next two to three years.
Stay informed, invest wisely, and check back for more insights!
https://youtu.be/tKhsVRMn9lE?si=dr9KEa803TYOk26b
Introduction
Hello everybody, Chuck Carnival here, co-founder of Fast Graphs—the fundamentals analyzer software tool. Today, I bring you another two-minute drill from our subscriber request series: Lessons in Valuation.
In this analysis, we’re taking a close look at Rogers Communications, a Canadian company with a strong income investment profile. Using Fast Graphs, I aim to illustrate how certain statistics can easily mislead investors unless thoroughly understood. As the saying goes:
So, let’s dive into Rogers Communications and break down what makes this stock unique in today’s market.
Understanding the Fast Graphs
Let’s begin by stripping price off the graph to get an unbiased look at its fundamentals. Immediately, a few critical observations jump out:
That’s a crucial distinction—those aberrant high-growth years should be discounted, allowing us to focus on current, more sustainable trends for a clearer valuation.
Key Positives and Investment Potential
Price-to-Earnings (P/E) and Market Behavior
At present, Rogers Communications is trading at a blended P/E ratio of 7. Historically, the market has valued this company at anywhere between:
The reason behind this valuation range likely revolves around its yield appeal.
Dividend Stability vs. Growth
One notable downside is that while the dividend yield remains attractive at 5.7%, dividend growth has been virtually non-existent.
Another factor worth considering: the company carries significant debt, which is not uncommon for a wireless telecommunications provider.
Future Forecast and Analyst Projections
Earnings Growth Expectations
Looking ahead, analysts project annual growth of around 2%, a conservative yet steady expectation. Over the last six months, these estimates have been revised downward, which may explain why the stock has become so cheap.
However, here’s where things get really interesting.
Potential Price Recovery and Returns
Using the Graham-Dodd formula, we draw the fair value line at a 12x multiple—which is calculated precisely at 11.93x earnings. If Rogers Communications simply returns to:
If the market reverts to historical valuations, this stock could deliver exceptional gains over the next few years.
Conclusion
At today’s pricing, Rogers Communications presents a unique opportunity. While dividend growth remains stagnant, the current valuation disconnect suggests strong potential for capital appreciation.
Of course, further due diligence is necessary, but based purely on past financial metrics and forecasts, Rogers Communications appears to be:
If the stock moves back to just a 10x or 12x multiple, investors stand to make substantial gains over the next two to three years.
Stay informed, invest wisely, and check back for more insights!
https://youtu.be/tKhsVRMn9lE?si=dr9KEa803TYOk26b