Image source: BT Group plc
BT‘s (LSE: BT.A) share price looks increasingly disconnected from its medium-term earnings growth outlook, in my view.
The market is still trading on short-term optics of heavy fiber capex, regulatory noise and muted consumer demand. However, the long-term story of making money is strong.
As fiber deployments increase, capex intensity decreases and Openreach’s footprint expands, BT’s earnings profile should improve significantly. And I believe this will drive its share price even higher.
So, how high can it go?
Income growth opportunities
Analysts’ consensus forecast is that BT’s earnings (‘earnings’) will grow at an average annual rate of 14% until the end of 2028 at least. The danger here is that the intense competition in this sector may reduce its score in the long run.
However, the key structural strength that should support that growth outlook is that BT is moving beyond the most cash-hungry phase of its investment cycle. Openreach has already passed more than 21m premises, according to its Q3 2025 results released on 5 February 2026. It will also pass 25m by the end of the year. As capex intensity decreases, a larger portion of the incremental revenue can be converted into profit and cash flow.
At the same time, the momentum for the adoption of full fiber is increasing. Openreach’s average revenue per user (ARPU) continues to rise. As fiber slowly replaces legacy copper, BT benefits from a structurally superior product mix – a direct tailwind of benefits.
And BT’s mobile arm remains a quiet force. EE remains the UK’s top-rated network, and private 5G+ coverage has reached two-thirds of the country. The long-term goal remains 99% by 2030, and this will support ARPU, reduce churn and support profitability.
In its Q3 2025 results, BT reiterated that it expects to achieve its full-year financial guidance. This includes cash flows that will reach around £2bn next year, and around £3bn by the end of the decade.
How high could they go?
To determine the value of BT, I performed a discounted cash flow (DCF) analysis. This indicates where any stock should trade, based on the projected cash flow of the underlying business. This, in turn, reflects the analysts’ consensus forecast for the company’s earnings growth in the coming years.
These cash flows are then discounted to the present day, using a value that reflects the risk of ownership. Some analysts’ DCF models may use different, more realistic inputs, which may produce lower estimates.
However, my modeling – which includes a 9.1% discount rate – suggests that BT shares are 49% undervalued at their current price of £2.06. Therefore, its fair value could be privately approached at £4.04 a share – almost double where the stock is trading today.
And because asset prices can trade back to their fair value over time, it suggests a very strong buying opportunity to consider today if that DCF assumption holds.
My investment idea
I believe BT’s valuation still looks too low relative to its improving medium to long term earnings growth profile.
When the market finally starts to properly price in that direction, I think the share price will go up.
As a result, I will be buying more shares in the near future and think they are worth the attention of other investors.
