What qualifies as a fair or typical PE ratio depends on how quickly the company is growing and the level of risk it faces. Higher growth prospects often justify a higher PE, while higher risk or slower growth tends to push the “normal” PE lower.

Currently, TELUS trades at a PE ratio of 27.3x. This is above both the Telecom industry average of 16.0x and the average of its direct peers at 8.4x. However, Simply Wall St’s proprietary “Fair Ratio” model goes beyond simple averages. TELUS’ calculated Fair Ratio is 16.7x, which adjusts for its specific growth expectations, profit margins, risks, industry, and market capitalization.

Unlike peer or industry comparisons, the Fair Ratio approach is more robust because it factors in what makes TELUS unique, including its future earnings potential, business risks, and competitive position. This provides a more nuanced view of valuation than surface-level ratios alone.

Comparing TELUS’ 27.3x PE to the Fair Ratio of 16.7x indicates that the stock is priced well above what would be considered fair given its fundamentals and outlook.

Result: OVERVALUED

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Earlier, we mentioned there is an even better way to understand valuation. Let us introduce you to Narratives, the simple and flexible framework that empowers investors to connect a company’s real-life story with the numbers behind its valuation.

A Narrative is your perspective on TELUS. It links the “why” (your story about the business, industry shifts, and key events) to the “how” (your forecast of revenue, profit and margins), ultimately leading to your view of fair value for the stock.

Narratives are available to everyone on Simply Wall St’s Community page, where millions of investors use and update them as new information arrives, such as earnings releases, strategy changes or news headlines. This makes Narratives an easy and accessible tool to guide your investment decisions.

By comparing your Narrative’s fair value to TELUS’s current price, you can clearly see if the market aligns with your outlook. This comparison can help you decide whether to buy, hold, or sell, and lets you instantly adjust when new insights appear.

For example, one investor’s Narrative for TELUS might focus on recurring revenue and digital health expansion, forecasting a CA$30.0 fair value. Another investor, worried about rising debt and regulatory risks, might set their fair value at CA$20.0.

Do you think there’s more to the story for TELUS? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include T.TO.

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