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Looking for an ASX blue chip share? Try the Telstra Group Ltd (ASX:TLS) share price

The Telstra Group Ltd (ASX:TLS) share price is up 1.5% since the start of 2024. It's probably worth asking, 'is the TLS share price undervalued?'
The Telstra Group Ltd (ASX:TLS) share price is up 1.5% since the start of 2024. At the same time, the Rea Group Ltd (ASX:REA) share price is 1.5% away from its 52-week high. This brief article explains why it could be worth adding TLS and REA shares to your ASX investing stock watchlist.

TLS share price in focus

Telstra was founded in 1975 and is Australia’s largest telecommunications company by market share providing over 22.5 million retail mobile accounts in 2023.

Telstra is responsible for building and operating telecommunication networks and has a range of businesses including fixed broadband, mobile, data and IP, and digital media. The company also has a presence in over 20 countries outside of Australia where it provides services to governments and businesses.

The advantage that Telstra has over competitors lies in its reach and scale, providing coverage to 99.6% of the Australian population and 5G services to over 85%.

REA shares

Founded in 1995, REA Group is a Melbourne-based real estate advertising company that is majority-owned by News Corp. In Australia, it’s best known for its Realestate.com.au platform.

REA Group operates on a global scale and now operates property websites in around 10 countries used by some 20,000 agents. In a typical month, the core Australian website gets over 55 million visits. While the business has diversified globally, Australian operations still account for the lion’s share of revenue. Within Australia, REA makes money by listing properties for sale or rent (i.e. the agent uses REA’s website to show properties, which the property owner is on the hook to pay). It also makes money from financial services (e.g. mortgage broking), but this is a much smaller part of the business.

The competitive advantge that REA has is the same as any other established platform: network effects and economies of scale. In other words, Domain (the #2 player) is meaningfully behind REA in users and views, which means REA can continue to control pricing and market dynamics. REA also benefits from owning assets across all parts of real estate, including listing, advertising, mortgage broking, and house sharing.

TLS share price valuation

One way to have a ‘speedy read’ of where the TLS share price is, is to study something like dividend yield through time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can fluctuate year-to-year or between payments. Currently, Telstra Group Ltd shares have a dividend yield of around 4.47%, compared to its 5-year average of 4.50%. Put simply, TLS shares are trading below their historical average dividend yield.

Since REA is more of a growth company than an established blue chip, a price-sales ratio might be a more appropriate assessment.The REA share price currently trades at a price-sales ratio of 17.05x, which compares to its 5-year long-term average of 16.25x. So, its shares are trading higher than their historical average. However, a simple multiple like this should only be the start of your research. Our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like Rea Group Ltd.

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Owen Rask’s investing report available

With bond ETFs like ASX:IAF and the S&P 500 riding high, now could be one of the best times to start earning passive income from a portfolio of shares and ETFs.

In this free analyst report, our Chief Investment Officer, Owen Rask, names 10 ASX stocks and ETFs to watch.

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