Since its gradual privatisation in the 1990s and 2000s, Telstra Corporation Ltd (ASX: TLS) has been one of the bluest blue-chip shares on the S&P/ASX 200 Index (ASX: XJO). From its days as Telecom Australia, this company has never experienced any other life than a mature telecommunications company with a dominant market share. But that isn't to say that the Telstra share price (and investors) hasn't had a few ups and downs along the way. After all, Telstra is a company that has had a share price of $8.75 and $2.66 at various points of its life.
Today, Telstra shares are trading at $3.92, down 0.25% for the day. So at this level, could you call the Telstra share price expensive or cheap compared to other ASX shares? Let's check it out.
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Is the Telstra share price cheap right now?
One of the best ways of measuring an ASX share's valuation is by using the price-to-earnings (P/E) ratio. This is especially true for a mature company like Telstra.
Telstra's current share price gives it a P/E ratio of 31.95. This means that at the current share price, investors are paying the equivalent of $31.95 for every $1 Telstra makes in earnings.
So is this expensive for Telstra shares? Well, arguably yes, compared to some other ASX 200 blue chips at least. Take Commonwealth Bank of Australia (ASX: CBA). It currently has the highest P/E ratio out of the big four ASX bank shares. But this is still only at around 17.3. The largest share on the ASX 200 is BHP Group Ltd (ASX: BHP). But BHP shares currently have a P/E ratio of just 9.36.
But that's banks and miners. These two sectors often tend to trade at lower P/E multiples than the rest of the market. CSL Limited (ASX: CSL) currently has a P/E ratio of 38.17. Woolworths Group Ltd (ASX: WOW) has an even higher metric of 42.92. Now that's getting closer to Telstra shares.
So ultimately, Telstra's valuation can be rather subjective. Looking at a P/E ratio of 31.95 for Telstra alone may lead some investors to think the telco is overvalued.
A dividend investor might just find out that Telstra is currently offering a fully franked dividend yield of more than 4% right now and not need to know anything else. Others might say it's cheaper than Woolies and thus worth a look. ASX broker Morgan Stanley is one who thinks the Telstra share price is a buy today.
In the meantime, the current Telstra share price gives this ASX 200 telco a market capitalisation of $45.6 billion.
