One of many star performers within the FTSE 100 index over the previous 12 months has been BT (LSE: BT.A). In simply 12 months, the BT share price has soared 47%.

Certain, it has been 12 months for the FTSE 100. The flagship blue-chip index has moved up 14% throughout that point. However with a efficiency over 3 times as sturdy, the BT share price has left it within the mud.

What has been occurring – and would possibly it make sense for me to purchase some BT shares for my ISA even at this level within the recreation?

Lengthy-term, revenues are in decline

On the operational stage, it has largely been enterprise as typical for the telecoms big.

Within the first 9 months of final 12 months, adjusted income fell 3% year-on-year. I don’t thoughts investing in companies with restricted progress prospects, however it’s at all times one thing of a pink flag to me when a agency has falling gross sales revenues.

That may make it more durable to swallow fastened prices – and a telecoms operator has loads of these. BT income has been in long-term decline for years with the odd exception (reminiscent of 2024).

Shaking the worth tree

The primary 9 months of final 12 months noticed adjusted earnings earlier than curiosity, tax, deprecation and amortisation (EBITDA) develop 2%. All of that got here from the agency’s Openreach division. Its client and enterprise arms each confirmed year-on-year EBITDA declines.

I usually deal with EBITDA with warning as a efficiency metric. Expenditures like curiosity and tax could be actual money prices. However within the first half, BT’s adjusted EBITDA grew 6% and reported revenue was even stronger, up a formidable 29% year-on-year. So whereas we await the full-year numbers, it appears to be like as if it was doubtlessly a 12 months of income contraction however actual revenue progress. That’s in keeping with a mature enterprise milking its money cow.

That helps clarify why the BT share price has carried out so strongly over the previous 12 months.

Buyers have been operating the slide rule over the enterprise and weighing up a few of its strengths, reminiscent of a still-powerful model, giant put in person base, vital pricing energy and an Openreach enterprise that’s each precious and has long-term progress prospects.

Add within the earnings and BT might have appeared like a cut price. Even now, after the share price rise, its whole market capitalisation is simply £15bn.

I don’t like the chance profile right here

However the full image is extra difficult than that. For one factor, the enterprise might solely have a market capitalisation of £15bn, however that doesn’t imply it’s valued at £15bn. BT additionally has web debt approaching £20bn.

Within the first half of final 12 months, that grew relatively than shrinking. Over the long run, a key threat I see (and that has put me off shopping for BT shares up to now) is that its legacy pension scheme may abruptly want extra money put into it, consuming into earnings.

Certainly, the enterprise stated the online debt progress within the first half was “mainly due to pension scheme contributions”. Add to that unsure long-term monetary obligation a enterprise in structural decline and I don’t see the BT share price as a cut price.

At a price-to-earnings ratio of 20, I see it as expensive. I cannot be investing.