Is BT's share price overpriced?

I BT (LSE: BT.A) share price has been flying recently. It took the stock a few months to start life this year. But after peaking in May, it doesn't appear to be slowing down. Back in May, the company released its full-year results, which left investors visibly excited. Since the announcement, its shares have risen nearly 15%.

Year to date, the stock is up 18.4%. In the last six months, it has increased by 37.2%. I FTSE 100increased by 4.3% during the same period.

But while its rise in recent months has been positive, it begs the question, has the stock gone too high, or is it possible that right now it's too good to pass up? Without further ado, let's get in.

Measurement

So the business clearly has momentum on its side. But is there any value left in the stock? There are a few metrics I can use to answer that. The first is the key price-to-earnings (P/E) ratio. BT currently trades at a P/E of 17.3.

Compared to the FTSE 100 average of 11, which may look very important. That said, BT is cheaper than bigger rivals like Vodafone (21.4) and Deutsche Telekom (25.9).

Moreover, its forward P/E is just 5.7. That looks like good value for a company of BT's caliber.

Trader predictions

That cheap valuation may be why analysts predict the stock will continue to rise in the coming year. Fifteen analysts providing a 12-month price target have an average of 200.1p. That represents a 35.1% premium to BT's current price. Of those, the high is 290p, which is 95.8% higher than where the stock currently sits.

Chunky assignments

Of course, analysts' predictions can be wrong. However, I think they can provide a good guide. In addition, despite the experts being bullish, the stock also has a dividend yield of 5.4%.

Its pay is comfortably covered by the benefits. And while its yield has fallen over the past few months due to rising share prices, it's still comfortably above the FTSE 100's 3.6%.

Debt burden

However while that is all well and good, I see a few major problems with BT. The first is its heavy debt.

The company's total debt currently sits at around £20.6bn. That's a huge pile and almost one and a half times BT's market capitalization. Furthermore, with the UK base rate sitting at 5%, higher interest rates will make this more expensive to service.

In addition, one of my concerns is competition. Admittedly, the business is in the process of implementing its long-term plan. However, it is alarming that BT has been losing customers, especially to smaller and nimble competitors. That's a trend I'll be watching closely in the coming months.

Guide me well

Although BT is attractively priced, I see a number of problems with the business, namely its huge debts and increasing competition.

This is why I avoid adding any stocks to my portfolio. Despite its impressive growth, I'll be keeping it on my watch list for now.