Has BCE Become Too Expensive?

BCE Inc. (TSX:BCE)(NYSE:BCE) has been performing very well this year with the stock up 19% since January and it currently trading right around its 52-week high. As well as the stock has done, performances like this aren’t typical for BCE. Last year, the stock was down more than 9% and the year before that it was up just 3%.

The stock hasn’t typically been a high performer. While it pays a good dividend of around 5% per year, investors typically shouldn’t expect a lot in the way of capital appreciation. That’s why this latest rally could be due for an adjustment. The stock has recently come out of overbought territory with a Relative Strength Index (RSI) as high as 75. RSI is a helpful indicator for investors to alert them when a stock has seen an excess in buying or selling, and an amount over 70 indicates the stock has been overbought and could be due for a correction.

Currently, it’s closing in on an RSI of 65 and could again become overbought. With the stock also being close to a price-to-earnings ratio of 20, BCE may start to be looking a bit expensive for investors, especially given that the company hasn’t been achieving a lot of growth. At the very least, there may not be much more room for the stock to climb in value given the returns it’s already achieved this year and the valuation it’s at today.

If you’re looking to buy BCE, you may be better off waiting for a drop in price before doing so.