Can Telstra Group Limited (ASX:TLS) Performance Keep Up Given Its Mixed Bag Of Fundamentals?

Simply Wall St.08-12

Telstra Group's (ASX:TLS) stock is up by 4.6% over the past three months. However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices, ...

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However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices, ...</p>\n\n<a href=\"https://finance.yahoo.com/news/telstra-group-limited-asx-tls-043053951.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4097","symbol_name":"系统软件","start_time":0,"source_url":"https://finance.yahoo.com/news/telstra-group-limited-asx-tls-043053951.html","article_id":"2458562383","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/C7n1YiRPMg7Jhi_n_guhHA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/30ab0341c0d13fbadb1c63981020d5d3"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2458562383","pubTimestamp":1723437053,"sourceInfo":{"source_id":"yahoofinance_au","name":"Yahoo Finance AU"},"weMediaInfo":null,"summary":"Telstra Group's  stock is up by 4.6% over the past three months. However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices, as stock prices tend to be aligned with a company's long-term financial performance. Specifically, we decided to study Telstra Group's  ROE in this article.Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.So, based on the above formula, the ROE for Telstra Group is:. However, when we compared Telstra Group's growth with the industry we found that while the company's earnings have been shrinking, the industry has seen an earnings growth of 20% in the same period. This is quite worrisome.Is Telstra Group Using Its Retained Earnings Effectively?","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4097":"系统软件","BK7042":"综合电信业务","TLS":"Telos Corporation","TLS.AU":"TELSTRA GROUP LTD","BK4115":"综合电信业务","TLGPY":"Telstra Group Limited","BK7511":"ESG概念"},"translate_title":"鉴于Telstra Group Limited(ASX：TLS)的基本面好坏参半，其业绩能否跟上？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TLGPY":1,"TLS":1,"TLS.AU":1},"content_text":"Telstra Group's (ASX:TLS) stock is up by 4.6% over the past three months. However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices, as stock prices tend to be aligned with a company's long-term financial performance. Specifically, we decided to study Telstra Group's  ROE in this article. \n Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits. \n Check out our latest analysis for Telstra Group \n How To Calculate Return On Equity? \n Return on equity can be calculated by using the formula: \n Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity \nSo, based on the above formula, the ROE for Telstra Group is:\n12% = AU$2.2b ÷ AU$18b (Based on the trailing twelve months to December 2023).\n The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every A$1 worth of equity, the company was able to earn A$0.12 in profit. \n What Is The Relationship Between ROE And Earnings Growth? \n We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. We now need to evaluate how much profit the company reinvests or \"retains\" for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes. \n Telstra Group's Earnings Growth And 12% ROE \n To begin with, Telstra Group seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 5.2%. Needless to say, we are quite surprised to see that Telstra Group's net income shrunk at a rate of 6.4% over the past five years. Based on this, we feel that there might be other reasons which haven't been discussed so far in this article that could be hampering the company's growth. These include low earnings retention or poor allocation of capital. \n However, when we compared Telstra Group's growth with the industry we found that while the company's earnings have been shrinking, the industry has seen an earnings growth of 20% in the same period. This is quite worrisome. \n\n\n\n  ASX:TLS Past Earnings Growth August 12th 2024\n \n\n Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is TLS fairly valued? This infographic on the company's intrinsic value  has everything you need to know. \n Is Telstra Group Using Its Retained Earnings Effectively? \n Telstra Group has a high three-year median payout ratio of 94% (that is, it is retaining 6.0% of its profits). This suggests that the company is paying most of its profits as dividends to its shareholders. This goes some way in explaining why its earnings have been shrinking. The business is only left with a small pool of capital to reinvest - A vicious cycle that doesn't benefit the company in the long-run. To know the 2 risks we have identified for Telstra Group visit our risks dashboard for free. \n In addition, Telstra Group has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 95%. Still, forecasts suggest that Telstra Group's future ROE will rise to 16% even though the the company's payout ratio is not expected to change by much. \n Conclusion \n Overall, we have mixed feelings about Telstra Group. Despite the high ROE, the company has a disappointing earnings growth number, due to its poor rate of reinvestment into its business. That being so, the latest industry analyst forecasts show that the analysts are expecting to see a huge improvement in the company's earnings growth rate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company. \nHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2458562383"}