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

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.

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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.