TLS share price in focus
Telstra was founded in 1975 and is Australia’s largest telecommunications company by market share providing over 22.5 million retail mobile accounts in 2023.
Telstra is responsible for building and operating telecommunication networks and has a range of businesses including fixed broadband, mobile, data and IP, and digital media. The company also has a presence in over 20 countries outside of Australia where it provides services to governments and businesses.
The advantage that Telstra has over competitors lies in its reach and scale, providing coverage to 99.6% of the Australian population and 5G services to over 85%.
Since we consider Telstra Group Ltd to be a blue chip stock, or a mature business, we like to look at things like return on invested capital (ROIC) and revenue growth as signs of sustainability. In FY24, Telstra Group Ltd had an ROIC of 10.20% and revenue has compounded at 2.1% in recent years. Anything over 10% ROIC is pretty good for a mature-style business, since its cost of capital is likely below that level, so Telstra Group Ltd crosses this hurdle.
WOW shares
Founded in 1924, Woolworths is a retail operator in Australia and New Zealand with over 3,000 stores and over 100,000 employees. It is one of Australia’s largest companies in terms of revenue and market share.
Woolworths’ main operations include supermarkets (under the Woolworths brand in Australia and Countdown in New Zealand), retailing through its discount department stores under the Big W brand, and business-to-business (B2B) brands like PFD. However, its 35%+ market share of Australian groceries is undoubtedly its crown jewel.
Woolworths is a very popular choice for many ASX investors seeking dividend income. Historically, it has consistently paid a fully franked dividend, usually at a yield of over 3%, and offers a very defensive earnings stream with most revenue coming from consumer staples. Its competitive advantage is best summarised as scale (distribution, low costs, etc.) and proximity (most shoppers still shop based on distance to the supermarket).
TLS share price valuation
We would consider TLS to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that might be important to us include the debt/equity ratio, average yield, and return on equity, or ROE. For FY24, Telstra Group Ltd reported a debt/equity ratio of 99.4%, meaning the company has more equity than debt.
Over the last 5 years, TLS has delivered an average dividend yield of 3.6% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, TLS reported an ROE of 10.7%. For a mature business you generally want to see an ROE of more than 10%, so TLS clears this hurdle.
In FY24, Woolworths Group Ltd reported a debt/equity ratio of 300.2%, meaning the company is leveraged.
As for dividends, since 2019 WOW has achieved an average dividend yield of 2.9% per year, and in FY24 reported an ROE of 1.9%
It’s important to keep in mind that these are only a selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, I’d recommend checking out one of our free online investing courses.
