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Why Telstra is up 40%

Shares of Australia’s leading telco and ISP Telstra (ASX: TLS) have risen 40% in the last twelve months, versus a 16.5% rise in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO). What’s behind this smashing outperformance, and most importantly for investors, can it continue?

TLS vs AXJO

First half 2013 financial performance and CEO comments

For the first half of 2013, chief executive David Thodey reported to analysts that, “Total income increased by 1.7%, EBITDA grew by 5% and NPAT, Net Profit After Tax, up 8.8%.”

Telstra continues to consolidate market share as well, Thodey reported: “We continue to gain share in key products and we added 607,000 new domestic mobile customers and the fixed broadband business continues to perform strongly with an additional 85,000 retail fixed broadband customers.”

Looking forward with product improvements, “We’re on track with our 4G network expansion to 66% of the population by the end of June this year. On the fixed side we completed an upgrade to almost 2,000 sites enabling around 480,000 customers to access ADSL2+,” Thodey said.

Yet even these strong results don’t tell the entire story.

Plus, new $1.1 billion deal

Most recently, Telstra announced it has signed a deal worth a whopping $1.1 billion with Defence to provide telecommunications services for the next six and a half years, with the company slated to “deliver technology that can become the backbone of Australian Defence for the next decade and beyond.”

Today, with Telstra shares now trading for 17 times earnings, or an enterprise value to EBITDA ratio of about 7, it seems Mr. Market has caught up to this company’s growing strength.

So are Telstra shares still a buy? Discover one top analyst’s answer to this compelling question in The Motley Fool’s brand-new FREE report, “Is It Time to Sell Telstra?” It’s free, click here for your instant download!

More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

 

 

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