Would I buy Telstra shares after its FY23 report?

The telco reported a number of positive things.

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Telstra Group Ltd (ASX: TLS) shares have gone backwards since the ASX telco share revealed its FY23 result. The share price is down by over 6%.

After seeing the numbers, and being offered Telstra shares at better value, let's look at whether it could be worth buying right now.

Earnings recap

First I'll recap the main financial highlights from FY23.

Telstra reported that its total income rose 5.4% to $23.2 billion, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 9.6%, net profit after tax (NPAT) grew 13.1% to $2.1 billion and earnings per share (EPS) improved 16% to 16.7 cents.

The profit growth enabled the business to increase its final dividend per share from 8 cents to 8.5 cents. That brought the full-year dividend to 17 cents per share.

During the year it made pleasing progress on its network. Its 5G population has reached 85%, with 41% of mobile traffic now on 5G. It also said that it has signed deals with low earth orbit satellite providers OneWeb and Starlink so that it can provide new and improved services in regional and remote Australia.

Is the Telstra share price now attractive?

The result ticked the main boxes that I wanted to see from the business. It grew revenue, achieved net profit growth that was even faster, and increased its dividend for shareholders.

Telstra is investing in a number of different areas that could help long-term profit growth.

It said that it's investing in infrastructure with its inner-city fibre network and submarine cable network which will see it "strategically positioned for growth". The company also said it's investing in capabilities and partnerships to grow its offering in areas like artificial intelligence, data analytics, the 'internet of things', and cybersecurity.

In FY24, the business is expected to grow its underlying EBITDA to between $8.2 billion to $8.4 billion, which would be growth of between 2.5% to 5%. This isn't exactly the fastest growth rate, but it signals that the business' profit can continue to increase.

Currently on Commsec, the business is projected to generate EPS of 18.9 cents and pay a dividend per share of 18 cents. This would suggest the Telstra share price is valued at 21 times FY24's estimated earnings with a possible grossed-up dividend yield of 6.5%.

The price/earnings (P/E) ratio isn't as cheap as it could be, but let's keep in mind that the company's underlying earnings are growing and so is the dividend.

I'd prefer to own Telstra shares over ASX bank shares because of its growing dividend and earnings outlook, as well as having a much stronger market position.

In my opinion, this is an opportunity to buy the dip and ride the earnings growth over the next few years. I'm particularly excited by the profit margin growth potential of more customers changing their home broadband to 5G rather than using the NBN.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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