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Is the Telstra share price a buy?

Is the Telstra Corporation Ltd (ASX: TLS) share price a buy?

As investors I think it’s always a good idea to keep a look out for shares that could be too cheap to ignore.

The Telstra share price has fallen 56% since February 2015 and it’s down 22% over the past year. It has been a tough decade for Telstra shareholders, the share price is lower than it was in January 2010.

Actually, you could say it’s been a tough century so far with the share price around a third of the price it was trading at around 20 years ago.

It would be a bit unfair of me to just focus on the share price, Telstra has paid out a lot of returns as dividends over the years.

However, I tend to agree with the view that the composition of Telstra’s shareholder register hasn’t helped. Management have been too focused on pleasing the income-focused SMSFs rather than re-investing for growth.

That lack of focus is now biting hard. The NBN has taken Telstra’s economic moat – the ownership of the cable infrastructure – leaving Telstra to compete on the same terms as every other telco like TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC).

The biggest advantage that Telstra has these days is its mobile network. Despite the occasional signal blackouts, it is still regarded as the country’s leader network provider.

Telstra seems to be betting the house on the 5G technology boosting average revenue per user. The Internet of Things, automated cars, virtual reality and so on could drive significant growth for the company if things go well.

Foolish takeaway

Telstra is currently trading at under 14x FY19’s estimated earnings with a trailing grossed-up dividend yield of 10.8%.

It’s hard to imagine that Telstra’s share price will drop much further from here, but it will depend on what happens with the reported profit. I wouldn’t expect decent profit growth any time soon, so the share price may not recover in 2019 either.

I believe there are better growth shares than Telstra on the ASX.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended TPG Telecom Limited and Vocus Communications Limited. 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 Scott Phillips.

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