The move probably reflects recent forecasts by Telstra management of broadly flat revenue and EBITDA in the coming year.
According to online share commentator the Motley Fool, fair value for Telstra shares is approximately $5.60 based on analysts’ forecasts for earnings per share of 33.7 cents in financial year 2016.
But the Fool says Telstra’s relative valuation appears more compelling when looking at enterprise value, or EV, which it says provides a truer picture of the worth of the core business
With an EV of $86.5 billion, and based on a somewhat arbitrary average EV/EBITDA multiple of 8x, Telstra shares are worth $7.28 a pop, the Fool says – but, on the other hand, taking everything into consideration it reckons a fair value estimate for Telstra shares probably lies somewhere around $6.11. Time to buy?
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