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Two reasons to watch Telecom Plus (LON:TEP) stock price

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The Telecom Plus (LON:TEP) The stock price is currently trading at 1,720p. But given the uncertain economic outlook, the question now is what the future holds.

To try to predict where Telecom Plus the price will head next, it is worth knowing its potential strengths and weaknesses. The promising news is that it appears to compare well to some important financial and technical metrics…

Specifically, it is a mid-cap stock with exposure to of them Influencing factors of stock market investment returns: high quality and strong momentum.

Quality and dynamism are highly valued by investors. Good quality stocks are more likely to be resilient, cash-generating businesses that can compound investment returns over time. Strong price and earnings momentum indicate that stocks have positive trends that are likely to continue.

To understand why quality and momentum are so important in an action like Telecom Plushere is a closer view:

Get insights based on data in LON:TEP

Why quality matters…

When it comes to stock analysis, company quality tends to translate into high profitability and strong margins, some of the best in the industry. These types of businesses are stable, growing, and often have accelerating sales and profits. They also have solid and improving financial histories, with no signs of bookkeeping or bankruptcy risk.

One of the quality indicators of Telecom Plus is its return on capital employed over 5 years, which is 15.5%. Good double-digit ROCEs can be an indicator of companies that can grow very profitably.

…and why momentum is so powerful

Positive trends are evident in stock prices and earnings growth. You can find the clues in stocks that are trading near their 52-week highs and outperforming the market. They will often exceed broker estimates and get forecast updates and recommendation changes.

This appears to be the case at Telecom Plus, where the stock price has returned 33.5% relative to the market over the past 12 months. Market volatility and economic uncertainty can significantly dampen momentum, but previously strong stocks can quickly rally when confidence returns.

In summary, good quality and momentum indicate some of the best stocks on the strongest uptrends. This combination of factors can be a clue to finding stocks that can compound investment returns over many years.

In good times, these stocks can become expensive to buy. But in volatile markets, there may be chances to buy them at cheaper prices.

What does this mean for potential investors?

Finding good quality stocks with strong momentum behind them is a strategy used by some of the world’s most successful investors. But beware: these factors do not guarantee future returns and we have identified some areas of concern with Telecom Plus which you can read about here.

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