Down 20% but 15% annual earnings growth forecast — is BT’s share price a bargain or a bust going into 2026?
BTâs (LSE: BT.A) share price has dropped 20% from its 25 July one-year traded high of £2.23.
This could signal a bargain opportunity in Britainâs biggest broadband and mobile operator. Or it could indicate the firm is simply worth less now than it was before.
To find out which it is, I looked at the core business trajectory and key valuation measures.
So, what is the answer?
Business at a turning point
BT is undergoing a transformation, and a failure to implement this optimally remains the key risk for it.
On one side, it remains the backbone of the UKâs telecoms sector, with Openreach driving the fullâfibre rollout and EE leading in 5G coverage. On the other, its international arm drags on revenue, while high leverage and intensifying competition continue to erode margins.
Its recent results highlight these positive and negative elements at play. Its H1 2025 results released on 6 November showed record fibre-to-the-premises builds of 2.2m+ premises. This expands its footprint to 20.3m homes and businesses, including 5.5m in rural areas.
Openreach broadband average revenue per user grew 4% year on year to £16.7, driven largely by higher fibre adoption. BT’s EE continued to lead the UK mobile market, with 5G+ standalone coverage reaching 66% of the population.
However, outside the UK, BT completed strategic exits and reshaped its International unit, underscoring ongoing weakness in global operations.
Overall, the group saw revenue dropping 3% in the half to £9.8bn, while profit before tax dropped 11% to £862m.
That said, BT said it is on track to deliver adjusted revenue target of around £20bn this year. The same applies to its EBITDA target of £8.2bn-£8.3bn.
Moreover, analysts forecast that its earnings will grow 15% a year to end-2027.
And it is this growth that drives any firmâs share price higher over time.
Major undervaluation?
Beginning with comparisons to its competitors, BTâs 0.9 price-to-sales ratio looks cheap. It is second-bottom of its group, which comprises Vodafone at 0.7, Orange at 1, Deutsche Telekom at 1.1, and Telenor at 2.4.
The same is true of its 18.2 price-to-earnings ratio against its peer average of 23.8. And it also looks a bargain on its 1.4 price-to-book ratio compared to its competitor average of 1.7.
To cut to the chase on BTâs specific valuation, I ran the discounted cash flow model. This uses cash flow forecasts to identify the price at which any stock should trade, based on underlying business fundamentals.
It is the key test for me, as it produces a standalone valuation, unaffected by any under- or overvaluation of the relevant business sector.
In BTâs case, it shows the shares are a whopping 59% undervalued at their current £1.78 price.
Therefore, their âfair valueâ is £4.34.
My investment view
I bought BT originally for its strong earnings growth prospects. These should drive its share price, and dividend, higher over time.
Indeed, analysts forecast that its dividend yield will rise to 4.9% next year and the year after, from 4.6% currently.
I think this robust earnings growth is still in play, and consequently see the stock as a bargain, not a bust.
As such, I will buy more of the shares very soon.
The post Down 20% but 15% annual earnings growth forecast — is BTâs share price a bargain or a bust going into 2026? appeared first on The Motley Fool UK.
Should you invest £1,000 in BT Group right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if BT Group made the list?
More reading
- £10,000 invested in BT shares 3 months ago is now worth
- BT shares offer a 4.7% dividend yield â but should I buy them for retirement?
- £15,000 invested in BT shares at the start of 2025 is now worth…
- Down 21% this year, is BTâs share price an unmissable bargain after H1 results?
- What’s going wrong with the BT share price?
Simon Watkins has positions in Bt Group Plc. The Motley Fool UK has recommended Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
