Are Fortis and Telus still good?

Here is an article on Telus which you might find interesting. Should You Be Worried About TELUS Corporation's (TSE:T) 5.0% Return On Equity? One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. By way of learning-by-doing, we'll look at ROE to gain a better understanding of TELUS Corporation (TSE:T). Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits. How Is ROE Calculated? ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for TELUS is: 5.0% = CA$867m ÷ CA$17b (Based on the trailing twelve months to December 2023). The 'return' refers to a company's earnings over the last year. That means that for every CA$1 worth of shareholders' equity, the company generated CA$0.05 in profit. Does TELUS Have A Good ROE? Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. As shown in the graphic below, TELUS has a lower ROE than the average (11%) in the Telecom industry classification. Unfortunately, that's sub-optimal. However, a low ROE is not always bad. If the company's debt levels are moderate to low, then there's still a chance that returns can be improved via the use of financial leverage. A company with high debt levels and low ROE is a combination we like to avoid given the risk involved. Our risks dashboard should have the 5 risks we have identified for TELUS. Why You Should Consider Debt When Looking At ROE Most companies need money -- from somewhere -- to grow their profits. That cash can come from retained earnings, issuing new shares (equity), or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt used for growth will improve returns, but won't affect the total equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same. Combining TELUS' Debt And Its 5.0% Return On Equity It's worth noting the high use of debt by TELUS, leading to its debt to equity ratio of 1.45. With a fairly low ROE, and significant use of debt, it's hard to get excited about this business at the moment. Debt does bring extra risk, so it's only really worthwhile when a company generates some decent returns from it. Conclusion Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. Companies that can achieve high returns on equity without too much debt are generally of good quality. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE. But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. So I think it may be worth checking this free report on analyst forecasts for the company. REWARDS Trading at 65.4% below our estimate of its fair value Earnings are forecast to grow 19.57% per year Analysts in good agreement that stock price will rise by 21.8% RISK ANALYSIS Dividend of 6.73% is not well covered by earnings or cash flows Interest payments are not well covered by earnings Profit margins (4.2%) are lower than last year (8.8%) Shareholders have been diluted in the past year