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Is Top-Scoring FTSE 100 Share Vodafone Group Plc Still A Buy?

During 2013, I’ve looked at most shares in the FTSE 100 and graded them against these five quality and value indicators:

  • Dividend cover
  • Borrowings
  • Growth
  • Price to earnings
  • Outlook

Some companies scored highly against the business quality indicators of level of borrowings, earnings growth record, and outlook. Some shares scored highly against the value indicators of dividend cover and price-to-earnings ratio (P/E).

Quality and value in harmony

However, the most promising investment opportunities scored well on both business quality and valuation indicators.

In this mini-series, I’m revisiting some of the highest scoring shares to look at events since the original article and to assess the quality of the investment opportunity now. Some of these high-scoring firms could be investment winners for 2014 and beyond so, today, I’m revisiting Vodafone Group (LSE: VOD)  (NASDAQ: VOD. US), which scored 18 out of 25 in January. 

Good progress in Europe

2013 seems to be going well for Vodafone with a steady string of value-enhancing deals as the firm develops its presence in Europe.

February saw the successful outcome of the company’s £790m bid for frequency spectrum in the UK, clearing the way for rollout of an ultra-fast 4G service in the low frequency mobile phone market. In March, the firm collaborated with Orange to provide fibre network services to Spain’s home market. In May, the firm signed a next-generation access agreement with Deutsche Telecom allowing Vodafone to offer high-speed fixed-line broadband and internet protocol-based TV services across Germany. Then, in October, the takeover of Kabel Deutschland Holding AG helped firm up operations in Germany with the potential to provide a platform for further growth in the country.

The biggest news, however, came in September, when investors learned that Vodafone expects to gain $130 billion from its planned sale of a 45% stake in US operator Verizon Wireless. Cash and Verizon shares will drop onto Vodafone shareholders’ doormats during Q1 2014 because of that value-realising deal.

Valuation

There’s no change in my business-quality scores but, since January, Vodafone’s shares have risen 40% from 165p to 228p.

Back then, I thought the firm’s P/E rating slightly understated growth and yield predictions. Today, I think the forward P/E of about 14 and the forward yield of around 4.8% look up with expectations.

What now?

Vodafone’s growing participation in data-service markets is encouraging. As well as in Europe, the firm is doing well in emerging markets and continuing growth seems set to support the relatively large forward dividend yield.

As an income investment, Vodafone still looks attractive to me, however, I'm also keen on an idea from the Motley Fool's top value investor who has discovered what he believes is one of the most alluring income generating share-plays on the London market.

He sets out his three-point investing thesis in a report called "The Motley Fool's Top Income Share", which I recommend to you for your own research and due diligence. The report, setting out the 'buy' case for this dividend-generating star, is available now by clicking here.

> Kevin does not own shares in Vodafone. The Motley Fool has recommended shares in Vodafone.