Is Now the Right Time to Buy Rogers Communications Stock?

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After facing multiple legal and regulatory challenges, Rogers Communications (TSX:RCI.B) has finally completed the acquisition of its smaller home market rival Shaw Communications. The Canadian communications giant first announced its intentions to purchase all outstanding shares of Shaw way back in March 2021. However, it faced setbacks after the Canadian anti-trust regulator, on multiple occasions, tried to block the Rogers-Shaw merger deal. Nonetheless, in January this year, the Federal Court of Appeal dismissed the competition bureau’s appeal to block the takeover.

Before I highlight why Rogers stock could be worth buying now for the long term, let’s understand how this merger could accelerate its financial growth.

How the Rogers-Shaw merger could benefit investors

With the Rogers-Shaw merger, the combined company has now become the second-largest Canadian communications company by revenue after BCE. This merger’s primary focus is to accelerate the infrastructure development and deployment of 5G services in Western Canada with an investment of $2.5 billion. With these efforts, 5G services are also expected to be more affordable in the future.

In addition, Rogers plans to invest $3 billion to improve its broadband services infrastructure, which should help it provide faster speeds to a large consumer base from northern Ontario through to British Columbia. All these initiatives should significantly accelerate Rogers’s financial growth trends and profitability by lowering its costs due to economies of scale. These are some of the key factors that make Rogers stock look more attractive now than ever before.

Besides the fundamental outlook, you must also pay attention to a stock’s recent financial growth trends before arriving at your final investment decision.

In the five years between 2017 and 2022, Rogers’s total revenue rose 9% to $15.4 billion, despite witnessing a sharp year-over-year decline in 2020 due to COVID-19-driven challenges. Similarly, its adjusted earnings during the same five-year period grew positively by 7% to $3.78 per share.

In 2022, Rogers posted an adjusted net profit margin of 12.4%, which has the potential to expand further in the coming years, as its 5G services and broadband network continues to grow. According to its updated 2023 guidance, the company now expects the growth in its total service revenue to be between 26% to 30% year over year. Similarly, the telecom company has guided adjusted earnings before interest, taxes, depreciation, and amortization to increase in the range of 31-35% in the ongoing year.

Bottom line

In my opinion, the recent merger deal has massively improved Rogers’s fundamentals. Despite that, its share prices haven’t seen much appreciation lately. After rising moderately by 5.2% in 2022, its stock now trades with only 1.1% year-to-date gains, underperforming the broader market. By comparison, the TSX Composite benchmark has gone up by 4.6% in 2023 so far. Given that, Rogers Communications could be a great Canadian 5G stock to buy right now and hold for the long term, as it has the potential to yield healthy returns on investments.

Besides these expectations, Rogers offers a decent 3.1% annualized dividend yield at the current market price, and its dividends can help you earn extra income.

The post Is Now the Right Time to Buy Rogers Communications Stock? appeared first on The Motley Fool Canada.

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The Motley Fool recommends Rogers Communications. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.