I almost fell off my chair yesterday when I noticed that the share price of longstanding FTSE 100 laggard BT (LSE: BT-A) had recently set a new 52-week high.

With long-term holders finally seeing some positive momentum, should I take a stake myself?

Market-beating stock

BT is up 29% in the last 12 months and 21% since the start of 2024 alone. Readers probably don’t need me to tell them that this performance has absolutely thrashed the index return (+10% and +8%, respectively).

Much of this rise came in May and in response to the last set of interim results. Yes, a 31% fall in pre-tax profit to £1.1bn (due to a huge impairment charge) wasn’t ideal. But the market clearly warmed to new CEO Allison Kirkby’s plan to cut costs by another £3bn going forward.

Cheap…but there’s a catch

Despite the stellar rise, BT shares still trade at a forward price-to-earnings (P/E) ratio of eight. The average P/E among UK stocks is roughly mid-teens. So, one could say this looks cheap. The dividend yield also stands at a chunky 5.3%.

Then again, let’s remember that analyst projections can be (and often are) wide of the mark. In addition to this, there are other, more specific things relating to BT that I’ve long been wary of. The creaking balance sheet, for example.

Net debt is currently more than the value of the company itself. Since we’re extremely unlikely to see very low interest rates again, that’s quite a millstone BT has around its neck. This is also a capital-intensive business. So, it can’t just shut off the money tap completely.

The market in which BT operates remains incredibly competitive too. Many customers are being lost to alternative network providers, making it hard to grow revenue.

A better FTSE 100 buy?

Given these concerns, I’d be more inclined to buy another top-tier stock sitting at a 52-week high.

The company in question is vehicle marketplace provider Auto Trader (LSE: AUTO). It’s value has climbed by 41% in the last year and 25% in 2024.

In contrast to BT, there’s only a little debt on the balance sheet here. A lot of this is down to the £8bn-cap operating wholly online. This also means that margins are magnificently high and stonking returns can be achieved on the cash management injects into the business.

Throw in the sort of market dominance that’s on par with FTSE 100 peer Rightmove and the investment case looks far better than BT, in my opinion.

Highly valued

All that said, I’m wary of the valuation.

Auto Trader stock now changes hands on a P/E of 27. That makes me a little nervous, even if this is in line with its long-term average. Expensive growth stocks can get hammered the most when an unwanted economic event occurs, such as a rebound in inflation. Once I’ve made the decision whether to buy or not, it might be psychologically easier for me to buy in tranches when cash becomes available.

Longer term, I’m also pondering how the company will adapt if vehicle ownership declines and a more subscription-based approach gains traction.

As things stand, however, I’d be more confident in my ability to stick by this company if the markets had a tizzy (technical term).