3 of the best telco shares to buy today

The Telecommunications Services sector is split into two industry groups – Diversified Telecommunication Services and Wireless Telecommunications Services.

It’s actually quite a small “pond” with just 19 constituents across the sector of which Telstra Corporation Ltd (ASX: TLS) is obviously the “big fish”.

Aside from Telstra there are a number of other interesting businesses within the sector. Importantly, they are all smaller which means it can be easier for them to grow at faster rates.

Given the continued growth in demand for data and the growth in mobile devices, there appears to be significant momentum within the telco sector and a number of exciting growth opportunities exist.

Here are three companies I’m keeping on my watch list.

Speedcast International Ltd (ASX: SDA) is a provider of satellite services aimed at servicing the growing demand for wireless data communications.

According to analyst consensus data, the company is forecast to earn 27 cents per share (cps) in financial year (FY) 2017. With Speedcast’s share price rising 18% in the last year to $3.68, this implies a forward price-to-earnings (PE) ratio of a reasonable looking 13.6 times.

TPG Telecom Ltd (ASX: TPM) commands a market capitalisation of over $10 billion thanks to solid share price appreciation and a number of well-executed acquisitions. While TPG remains well behind the $70 billion capitalisation of Telstra, it still makes TPG the second-largest listed telco.

Consensus data is forecasting FY 2017 earnings per share (EPS) of 48.5 cps. With the share price trading around the $12 mark, the forward PE ratio is 24.7 times.

Amaysim Australia Ltd (ASX: AYS) is a small, nimble player within the mobile phone market where it offers both pre-paid and post-paid plans to customers.

A slump in Amaysim’s share price in February has seen the share price fall from over $3 to currently trade at $1.88. With a consensus forecast for FY 2017 of 15 cps, the stock trades on a PE of 12.5 times. (source: Reuters)

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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