BCE Inc

BCE (TSX: BCE) is both a wireless and Internet service provider, offering wireless, broadband, television, and landline phone services in Canada. It is one of the big three national wireless carriers, with its roughly 10 million customers constituting about 30% of the market.

Why should investors book profit?

• Relatively overvalued: From the valuation standpoint, BCE shares looks expensive, as from TTM Price to Earnings multiple (x) BCE share are trading at a multiple of 21.56x whereas average industry peers are trading at a TTM P/E multiple of 17.57x and implies that BCE shares are trading at a premium valuation of 23%. Further, from TTM Price to Sales and TTM Price to Free cash flow multiple, BCE share are overvalued against its respective peer.

Source: REFINITIV, Analysis by Kalkine Group

• Increase in Debt positon: As of September 30, 2021, BCE’s Debt/Equity ratio stood at 1.52x, increased from 1.50x reported as of June 30, 2021. Also, BCE’s Debt contribution in the balance sheet is significantly higher compared to industry median of 0.95x. Hence, investors in BCE are exposed to a higher balance sheet risk compared to its peers.

• Generating a lower ROE (common equity): Despited a premium valauation BCE shares are commanding againt the peer’s, the company is generating a lower retrun on shareholder’s money. TTM ROE (Common equity) for BCE stood at 15.4% whereas peer’s ROE (common equity ) stood at 23.6%.
  

Stock recommendation

BCE shares are relatively overvalued from multiple Price-based valaution standpoint, despite the fact that company’s balance sheet is highly leveraged compared to its peer and also generating a lower retun on shareholders money. Also, uncertainities are quite high due to resurgence in COVID-19 cases, any adverse move in the broader could bring large correction in BCE share. Hence, we recommend a “Sell” rating on “BCE” shares at the closing price of CAD 64.92 (as on December 15, 2021).

1-Year price chart (as on December 15, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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