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 big has underperformed the broader markets by a big margin.
Debt considerations, a aggressive wi-fi market in Canada, and a normal 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 cellphone 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 embrace over 50% of the Fortune 500. The platform handles psychological well being help, worker help applications, major care software program, and extra. It’s an AI-driven, subscription-based enterprise, and it’s rising quick.
TELUS CEO Darren Entwistle stated the Well being division delivered double-digit progress 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 progress once more in 2026 for each TELUS Well being and TELUS Digital, the corporate’s AI and buyer expertise arm.
“We’ve received double-digit progress coming from TELUS Digital. We’ve received double-digit progress coming from TELUS Well being,” Entwistle stated through the earnings name. “I feel that gives a sturdy story.”
The free money movement case is compelling
Right here’s the place it will get attention-grabbing for buyers.
TELUS generated $2.2 billion in FCF in 2025, an 11% enhance over 2024. That follows 12% FCF progress in 2024 and 38% progress in 2023. Administration is guiding for about $2.45 billion in FCF for 2026, roughly one other 10% enhance.
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 progress fee (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 occasions, close to a 10-year low. The ten-year imply for this ratio is 21.1 occasions, with a excessive of 42 occasions through the pandemic increase.
Even a modest reversion to the imply, say, again to fifteen occasions NTM FCF, would suggest significant upside from present ranges. Making use of a 15 occasions 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 at present. If we account for dividend reinvestments, cumulative returns might surpass 100% over the following three years.
That’s not a assure. It’s a situation. But it surely exhibits how a lot compression is already baked into the present worth.
Debt is the true danger buyers want to look at
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 occasions. Administration is concentrating on 3.3 occasions or decrease by the top of 2026 and thrice by the top of 2027.
They’re actively working to get there, which incorporates promoting belongings, monetizing actual property and copper infrastructure, and exploring strategic buyers 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 received’t resume dividend progress 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 gradual telecom enterprise. If administration executes on its FCF targets and the valuation a number of merely normalizes, the following three years might look very completely different from the final three.
