Should Rogers Communications Be Worried About Its ROE of 8.5%?

Rogers Communications' return on equity (ROE) is 8.5%, lower than the average in the Wireless Telecom industry. While a low ROE is not always bad, caution is needed if debt levels are moderate to high. The company's low ROE and high debt levels pose a risk.

Rogers Communications (RCI, Financial), Canada's largest wireless service provider, has seen its stock price target raised by Barclays analyst Kannan Venkateshwar, who maintained an "Equal-Weight" rating [1]. The price target was increased from $31.00 to $33.00 USD, reflecting a 6.45% increase. This move suggests modest optimism about the company's future performance, with the new target indicating potential growth.

Rogers Communications boasts over 11 million subscribers, representing one-third of the Canadian market. Its wireless business accounts for more than half of its total revenue. The company's cable segment, following the acquisition of Shaw, provides home internet, television, and landline phone services, contributing about 35% of total revenue. The media unit, which owns various television and radio stations and the Toronto Blue Jays, as well as sports team ownership stakes, completes the revenue mix.

Analysts' Forecasts
Based on data from 10 analysts, the average target price for Rogers Communications Inc (RCI, Financial) is $39.32, with a high estimate of $51.52 and a low estimate of $30.91. This implies an average upside of 14.69% from the current price of $34.28 [1]. The consensus recommendation from 12 brokerage firms is "Outperform," with an average rating of 2.3, indicating a "Strong Buy" status [1].

GuruFocus estimates the GF Value for Rogers Communications Inc (RCI, Financial) in one year to be $45.92, suggesting an upside of 33.96% from the current price of $34.28 [1]. The GF Value is calculated based on historical multiples and future performance estimates.

However, despite the positive analyst sentiments, Rogers Communications' return on equity (ROE) stands at 8.5%, which is lower than the average in the Wireless Telecom industry. A low ROE, particularly when combined with moderate to high debt levels, poses a risk. Investors should closely monitor these factors as they can impact the company's financial health and growth prospects.

References:
[1] https://www.gurufocus.com/news/3056071/rogers-communications-rci-price-target-raised-by-barclays-rci-stock-news