Assessing Telesat (NasdaqGS:TSAT) Valuation After Strong Recent Returns And Ongoing Losses

Telesat (TSAT) stock has been on investors’ radar after recent trading performance, including a move of 12.18% over the past month and a very large 3 year total return that has drawn attention to its satellite communications business.

See our latest analysis for Telesat.

At a recent share price of $53.50, Telesat has seen strong short term momentum, with a 30 day share price return of 12.18% and year to date share price return of 83.47%. These returns are supported by a very large 1 year total shareholder return and a roughly 7x 3 year total shareholder return that point to a major rerating of the stock’s risk and growth expectations.

If you are looking beyond satellite communications for other potential ideas, it could be a useful time to scan 46 AI infrastructure stocks

With Telesat posting strong recent returns alongside annual revenue growth of 34.66% and a reported net loss of CA$185.31 million, the key question is whether the stock still presents an opportunity for investors or if markets are already fully accounting for its potential future growth.

Preferred Price-to-Sales of 2.9x: Is it justified?

Telesat trades on a P/S of 2.9x, which sits above both its closest peers and the wider US Telecom industry, even after the strong share price run to $53.50.

The P/S ratio compares the company’s market value to its revenue, so at 2.9x investors are paying $2.90 in market value for every $1 of annual sales. For a satellite communications business with forecast revenue growth, this multiple reflects what the market is willing to pay for that top line profile despite Telesat remaining loss making.

Compared with the peer average P/S of 2x, Telesat’s 2.9x multiple is meaningfully higher. This suggests the market is pricing in stronger prospects than for similar telecom companies. Against the broader US Telecom industry average of 1.4x, the premium is even more pronounced, while the estimated fair P/S ratio of 10.8x from the Simply Wall St model shows a large gap between the current market pricing and the level that model suggests the multiple could move toward if its inputs play out as expected.

Explore the SWS fair ratio for Telesat

Result: Price-to-Sales of 2.9x (OVERVALUED).

However, investors still face real risks, including the company’s ongoing CA$185.31 million net loss, as well as its heavy reliance on GEO satellite revenue while LEO remains relatively small.

Find out about the key risks to this Telesat narrative.

Next Steps

The combination of strong recent returns, revenue growth and ongoing losses sends a mixed message. Treat this as a prompt to review the data yourself and move quickly to form your own stance by checking the 1 key reward and 3 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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