With a 10.4% yield, P/E ratio of 9.9, and a P/B of 0.37, is this FTSE 100 stock a no-brainer buy for me?

Using a range of popular valuation measures, this FTSE 100 stock appears to offer tremendous value for money. So is it time for me to buy?

| 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.

Image source: Vodafone Group plc

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.

Choosing which FTSE 100 stocks to buy can be difficult. Many of them are household names and are major players in their individual markets. Generally speaking, their balance sheet strength means they are less likely to deliver earnings surprises. This should help ensure greater share price stability. And a lot of them pay generous dividends, which makes them attractive to income investors.

To sort the best from the rest — and to identify which offer the best value for money — many investors employ popular valuation techniques. I’ve been applying some of these to Vodafone (LSE:VOD) to see if the stock’s worth buying for my portfolio.

Created with Highcharts 11.4.3Vodafone Group Public PriceZoom1M3M6MYTD1Y5Y10YALL2 Dec 20194 Apr 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.co.uk

Crunching the numbers

With the words of Mark Twain ringing in my ears, it’s important to remember there are lies, damned lies, and statistics.

Should you invest £1,000 in Vodafone right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Vodafone made the list?

See the 6 stocks

The 10.4% dividend yield for Vodafone — the highest on the FTSE 100 — is based on its payouts over the past 12 months. In March, the company announced a 50% cut. It’s therefore presently (29 November) yielding a more modest 5.2%. However, this is comfortably above the average for the index of 3.8%. Of course, dividends are never guaranteed.

In contrast, it’s fair to say that Vodafone’s price-to-book (P/B) ratio of 0.37 is the lowest (excluding those that have net liabilities) of all FTSE 100 members. At 30 September 2024, its balance sheet was disclosing equity (assets less liabilities) of €60.6bn (£50.4bn). With a current stock market valuation of £18.5bn, if the company ceased trading today — and it sold all of its assets and cleared its liabilities — there’d be £31.9bn of cash left over to return to shareholders. That’s a 172% premium to its current share price.

Looking at earnings, the stock has a price-to-earnings (P/E) ratio of 9.9, comfortably below the index average of around 14.5. But whether this is a good indication of value for money is relative. Different sectors attract different earnings multiples and these can fluctuate over time as industries fall in and out of favour. However, it’s lower than BT’s, its nearest rival in the FTSE 100. And it’s comfortably below the average of 202 European telecoms stocks (14.1).

So should I buy?

My verdict

I’m already a shareholder but, of course, this doesn’t mean I can’t include more of the stock in my ISA. Indeed, given that I’m sitting on a paper loss, it’d help reduce my average cost price. And hopefully, I’d break even quicker.

But I don’t want to buy any more, even though — on paper at least — the stock appears to be something of a bargain.

Although I think the company’s current turnaround plan will deliver results, it looks as though it’s going to take a while. Revenue in Germany — the telecoms giant’s largest market — is still falling. And it’s still unclear how the company’s merger with Three (which now looks likely to be given regulatory approval) is going to impact on the group’s financial performance. Its relatively high borrowings are also a cause for concern.

For these reasons, I think there are better opportunities for my investment cash elsewhere.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

James Beard has positions in Vodafone Group Public. The Motley Fool UK has recommended Vodafone Group Public. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »

Investing Articles

Are Trump’s tariffs a once-in-a-lifetime chance for ISA investors to get rich?

The £20,000 Stocks and Shares ISA limit will reset on 6 April. Smart investors could use current market volatility to…

Read more »

Investing Articles

Here are the latest Persimmon share price and dividend forecasts

Our writer looks at the latest forecasts for the Persimmon share price and considers what level of dividend the stock…

Read more »