Valued at a market cap of just about $29 billion, TELUS (TSX:T) is among the many hottest shares in Canada. Lately, the Canada-based telecom large has underperformed the broader markets by a big margin.
Debt issues, a aggressive wi-fi market in Canada, and a basic rotation away from yield-heavy names have weighed on shares. However strip away the noise, and the numbers inform a extra attention-grabbing story.
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TELUS is greater than only a telephone firm
Most individuals consider TELUS as a Canadian wi-fi provider. However the firm has been quietly constructing two high-growth companies alongside its core telecom operations.
TELUS Well being is now one of many largest workforce well-being platforms on the planet. It covers greater than 161 million lives throughout 200 nations. Its purchasers embody over 50% of the Fortune 500. The platform handles psychological well being help, worker help packages, main care software program, and extra. It’s an AI-driven, subscription-based enterprise, and it’s rising quick.
TELUS CEO Darren Entwistle mentioned the Well being division delivered double-digit development in income and earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) within the fourth quarter of 2025. He confirmed the corporate expects double-digit EBITDA development once more in 2026 for each TELUS Well being and TELUS Digital, the corporate’s AI and buyer expertise arm.
“We’ve acquired double-digit development coming from TELUS Digital. We’ve acquired double-digit development coming from TELUS Well being,” Entwistle mentioned through the earnings name. “I believe that gives a sturdy story.”
The free money movement case is compelling
Right here’s the place it will get attention-grabbing for traders.
TELUS generated $2.2 billion in FCF in 2025, an 11% improve over 2024. That follows 12% FCF development in 2024 and 38% development in 2023. Administration is guiding for roughly $2.45 billion in FCF for 2026, roughly one other 10% improve.
Analyst estimates proven on TIKR undertaking FCF reaching roughly $2.70 billion in 2027 and $3.4 billion in 2030. That’s a compound annual development charge (CAGR) of about 8% by means of 2030.
Now have a look at the valuation. The NTM (subsequent 12 months) market cap-to-FCF a number of at the moment sits round 11.8 instances, close to a 10-year low. The ten-year imply for this ratio is 21.1 instances, with a excessive of 42 instances through the pandemic increase.
Even a modest reversion to the imply, say, again to fifteen instances NTM FCF, would suggest significant upside from present ranges. Making use of a 15 instances a number of to $3.4 billion in estimated 2030 FCF, and also you get a market cap within the vary of $51 billion.
That’s 80% above the place the TSX dividend inventory sits immediately. If we account for dividend reinvestments, cumulative returns may surpass 100% over the following three years.
That’s not a assure. It’s a state of affairs. Nevertheless it reveals how a lot compression is already baked into the present value.
Debt is the true threat traders want to observe
TELUS isn’t with out challenges. The corporate carries a big debt load, with a internet debt-to-EBITDA leverage ratio that ended 2025 at 3.4 instances. Administration is focusing on 3.3 instances or decrease by the tip of 2026 and 3 times by the tip of 2027.
They’re actively working to get there, which incorporates promoting property, monetizing actual property and copper infrastructure, and exploring strategic traders for each TELUS Well being and TELUS Agriculture. Notably, TELUS has set a $7 billion goal for asset monetization.
The dividend, in the meantime, is being held regular. Administration has been clear that it gained’t resume dividend development till deleveraging is on observe and the dividend-reinvestment plan low cost is eliminated.
The Silly takeaway
TELUS is a turnaround story layered on prime of a gentle telecom enterprise. If administration executes on its FCF targets and the valuation a number of merely normalizes, the following three years may look very completely different from the final three.