For years, Vodafone’s (LSE: VOD) share price has been weighed down by heavy debt, regulatory shocks in Germany, and underperforming Spanish and Italian marketplaces.
Investors grew accustomed to dividend cuts, portfolio reshuffling, and a share price that seemed trapped near multi-year lows.
But after those years of crisis management, a clearer strategy appears to be emerging. This includes exiting weaker geographies, reducing leverage, and focusing on growth engines in Africa, Turkey, and the UK.
So the question is how much its earnings are set to grow and how high could this push the share price?
Strategic shift reflected in results
The fiscal-year 2025 results saw service revenue grow 5.1% organically year on year to €30.8bn (£26.9bn). This underlined that the firm could deliver growth even after years of stagnation.
Total revenue rose 2% to €37.4bn, while adjusted earnings before interest, taxes, depreciation, amortisation, and leases (EBITDAaL) climbed to €11bn. This improved margins to 30%.
Crucially, free cash flow was €2.5bn, beating guidance and demonstrating that the restructuring efforts are paying off. This could be a major driver for growth.
The balance sheet also showed progress, with net debt having been reduced by around €11bn over two years. This was driven by asset sales, including exits from Spain and Italy — two markets that had long dragged on performance.
The first half of the fiscal year 2026 numbers, released 11 November, showed double-digit growth sustained in emerging markets. Overall revenue climbed 7.3% to €19.609bn.
Strategically, the merger with Three – to create ‘VodafoneThree’ — was highlighted as making a “fast start”. However, any major failure in integration remains a key risk that could be costly in terms of money, service, and reputation.
Crucial earnings growth outlook
Earnings (growth is the key long-term driver for any firm’s share price and dividends.
In the H1 2026 numbers, Vodafone said it now expects to deliver at the upper end of its guidance ranges. These are: adjusted EBITDAaL of €11.3bn-€11.6bn and adjusted free cash flow of €2.4bn-€2.6bn.
Here, the merger with Three UK could be transformative, giving Vodafone scale to compete more effectively against BT and Virgin Media O2. Meanwhile, Africa and Turkey continue to provide strong growth.
Vodafone’s largest market – Germany — hit by regulatory changes around bundling TV contracts, remains the litmus test. However, improving customer satisfaction ratings suggest the groundwork for recovery is being laid.
Given these factors, analysts forecast Vodafone’s earnings will grow a stunning 55% a year to 2028.
So, how undervalued are the shares?
On the key price-to-sales ratio, Vodafone’s 0.7 is bottom of the group of its competitors, which averages 1.3. These are BT at 0.9, Orange at 1, Deutsche Telekom at 1.1, and Telenor at 2.4.
The same is true of its 0.5 price-to-book ratio compared to its peers’ average of 1.9.
A discounted cash flow analysis shows its shares are 60% undervalued at their current 95p price. This indicates their ‘fair value’ is £2.38.
This is critical, as asset prices tend to trade to their fair value over time.
My investment view
I already hold BT shares, so another telecoms stock would unbalance my portfolio.
However, I believe that Vodafone’s enormous earnings growth potential should spark a major long-term upwards re-rating of its share price.
Consequently, I think it worth consideration by other investors.
