The FTSE 100’s Hottest Growth Stocks: Vodafone Group plc

Royston Wild explains why Vodafone Group plc (LON: VOD) is an exceptional earnings selection.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

VodafoneToday I am outlining why Vodafone (LSE: VOD) (NASDAQ: VOD.US) could be considered a terrific stock for growth hunters.

A rough earnings record

A backdrop of plummeting revenues in its core European markets has hammered earnings growth at telecoms giant Vodafone in recent years. The business has seen earnings fall during three of the past five years, and printed a heavy 13% drop in the past financial year alone.

City analysts expect the business to report further weakness in the near-term, and a colossal 63% is currently pencilled in for the year concluding March 2015, to 6.5p per share. A modest 2% uptick is pencilled in for fiscal 2016 to 6.6p.

And Vodafone can hardly be considered a cheap proposition at these prices, either, sporting P/E multiples of 31.5 and 30.9 times prospective earnings for 2015 and 2016 correspondingly. These figures soar above the generally-regarded benchmark of 15 times or under which illustrates reasonable value for money.

Expansion in explosive sectors boosts earnings picture

But for those playing the long game — not to mention those more tolerant of riskier stock selections — I believe that Vodafone could turn out to be an explosive growth prospect.

In particular, I reckon the company’s aggressive expansion into the European ‘triple-play’ entertainment sector comprising broadband, television and telephone services should drive revenues skywards. Most recently Vodafone followed the purchase of Germany’s Kabel Deutschland last year and Spain’s Ono in July with an agreement to buy a 72.7% stake in Greek internet powerhouse Hellas Online for €72.7m in August.

Not only is this sector hugely lucrative in its own right, but the deals also give Vodafone terrific cross-selling opportunities for its mobile packages to resuscitate its ailing traditional businesses on the continent — the firm saw group service revenues in Europe decline a further 7.9% in April-June.

As well, the business is ramping up its operations in critical emerging markets to mitigate weakness in traditional geographies, and saw service revenues in the Africa, Middle East and Asia Pacific (AMAP) region climb 4.7% during the period. Vodafone saw particularly strength in India, where turnover advanced 10.3% on the back of insatiable data demand.

And through its Project Spring investment programme Vodafone should continue to reap the rewards of surging mobile phone demand in these regions, as well as to turn around its European divisions through rolling 3G and 4G service improvements.

I believe that Vodafone’s impressive financial clout to deliver solid long-term growth, even though fresh turbulence in the meantime appears an inevitability.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »