Vodafone had become too big and sprawling. Debt piled up, growth stalled and key markets such as Germany, Italy and Spain struggled. Telecoms is a competitive market, spectrum auctions cost a fortune and regulation was tight. The constant need for restructuring distracted management. Yet it finally appears to be bearing fruit.

The turnaround takes hold

Vodafone is a leaner beast today, after selling off weaker divisions and sharpening its focus. That’s freed up cash to chip away at its debts and fund a €4bn share buyback. It was even able to increase the dividend in November, the first hike since 2018. That felt like it turning a corner.

The Vodafone share price has climbed 45% in the last year. Add in the trailing dividend yield of 3.6% and the total return climbs to 48.6%. A £15,000 investment a year ago would now be worth £22,290. That’s a total return of £7,290. This shows the impressive rewards that can be made from investing in beaten-down FTSE 100 recovery stocks. However, as Vodafone has shown, investors may have to be very patient on occasion.

Q3 results on 5 February were pretty solid. Revenue rose 6.5% to €10.5bn, while adjusted core earnings edged up 2.3% to €2.8bn. The board expects full-year earnings to land at the top end of forecasts, between €11.3bn and €11.6bn, alongside adjusted free cash flow of €2.4bn to €2.6bn. The recent integration of Three UK appears to be on track.

Yet the shares dipped on the day, as Vodafone continues to struggle in Germany, its biggest market. And now we have war in Iran, and fears of another cost-of-living crisis. A lot of consumer stocks in my portfolio have taken a beating. But maybe telecoms is different. Nobody is giving up their mobile phone these days. Although more of them might shop around for a cheaper supplier. The shares have slipped 6.5% in the last month. That’s modest compared to some.

Reasons for caution

Despite all that good news, risks remain. Net debt sits around €25bn, pushed up by the Three deal. Companies like Vodafone have to keep pouring cash into their networks. There’s little room for error if trading conditions worsen.

The price-to-earnings ratio has climbed with the shares and now stands at 15.9. So I wouldn’t call that cheap. Vodafone shares are worth considering with a long-term view. But with recent volatility throwing up so many bargains on the FTSE 100, I wouldn’t put it at the top of my buy list.

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This does not necessarily mean that they are undervalued now, but they may be. That all depends on the strength of the underlying fundamentals of the business.

So, how do these look now, and how high can they drive the share price from here?

Business momentum building?

Earnings (‘profits’) growth is the engine for share price and dividend gains in any stock over time. A risk to Vodafone is the high degree of competition in the sector, which may compress its margins. And this pressure is only compounded by the group’s substantial debt. After all, building out telecommunications infrastructure isn’t cheap.

However, despite this, analysts’ consensus forecasts are that its earnings will grow by a stunning average of 55% a year to end-2028.

Vodafone’s latest major results (H1 fiscal year 2026) point to a business gaining significant operational and financial traction. Adjusted earnings before interest, taxes, depreciation, amortisation, and leases (EBITDAaL) increased 5.9% year on year to €5.7bn (£4.9bn). This was supported by broad‑based service‑revenue growth and early benefits from the integration of Three UK.

Its subsequent Q3 numbers, released on 5 February 2026, showed similar momentum, with group service revenue rising 7.3% to €8.5bn. Germany continued to improve, supported by higher wholesale revenue, while Africa saw 13.5% service growth. Overall, group adjusted EBITDAaL increased 2.3% to €2.8bn.

Vodafone added that it remains on track to deliver at the upper end of our guidance range for both profit and cash flow. For the former, the range is €11.3bn-€11.6bn, while for the latter it is €2.4bn-€2.6bn. It also announced a new €500m share buyback, which tends to support share price gains.

Are the shares undervalued?

In asset terms, price is just a function of whatever the market is willing to pay at any given time. But value reflects the fundamentals of the underlying business.

The key to long-term investors’ profits over time lies in recognising this gap and exploiting it. This is because asset prices (including shares) tend to trade to their ‘fair value’ over the long run.

The discounted cash flow (DCF) method identifies a share’s fair value by projecting a firm’s future cash flows and then discounting them back to today.

DCF modelling results vary according to the various inputs used — some more bullish than mine, others more bearish. However, based on my DCF assumptions — including a 7.5% discount rate — Vodafone shares are 48% undervalued at their current £1.09 price.

This implies a fair value for the stock of around £2.10 — nearly double where the shares trade today.

Given the tendency for prices to converge with value over time, this suggests a potentially superb buying opportunity to consider today if those DCF assumptions prove correct.

My investment view

I already have another telecoms sector stock — BT — and adding another would unsettle the risk-reward balance of my portfolio.

However, for investors without this problem, I think the stock is worthy of serious attention. It is deeply undervalued at a time of strong operational momentum.

This creates a compelling asymmetry: limited downward potential versus meaningful upward potential, if the turnaround continues.

And with the shares trading at barely half my estimate of fair value, I think patient long‑term investors may find this a rare opportunity hiding in plain sight.

The post Down 9% to just over £1! Are Vodafone shares too cheap to miss? appeared first on The Motley Fool UK.

Let’s look at three examples that are outpacing the FTSE 100 and might just continue doing so for the remainder of 2026.

Turnaround dividend stock

Despite Vodafone‘s (LSE: VOD) chequered history when it comes to distributing cash to its owners, investors have long gravitated towards the telecommunications behemoth for their dividend fix. But lately, this market juggernaut has been behaving almost like a growth stock! A 15% gain in 2026 compares favourably to the index’s 9% and adds to the super momentum seen in 2025.

Of course, the rise in its share price has reduced the dividend yield. Right now, this stands at 3.6% — fairly modest when other stocks in the FTSE 100 are yielding up to 8%. But it’s more than a bog standard index tracker would currently earn (2.9%).

After a tough few years, it looks like investors are warming to this company’s strategy of selling its non-core businesses and focusing more on growth markets. Indeed, the completion of its merger with Three UK last year seemed to mark an inflection point in sentiment.

My chief concern remains the massive debt load. Yes, it’s lower than a few years ago. But ongoing and fierce competition could make a substantial reduction unlikely for now.

Future proof

Also on a charge is mining giant Rio Tinto (LSE: RIO). Its shares have performed even better — rising over 20% since the start of January — helped by a surging copper price.

Despite this great performance, there have been a few volatile days in the mix. A couple of weeks ago, Rio’s price dropped as it posted flat annual earnings and missed analyst expectations due to weaker iron ore prices. This highlights the bumpy ride that all investors in commodities can expect.

Still, the likely huge demand for the red metal in the years ahead as the world migrates towards to cleaner energy sources surely bodes well for Rio as both a long-term income and growth play.

Again, the dividend yield isn’t quite what it was. But 4.6% is hardly bad. And although those cash distributions can never be guaranteed, they look set to be covered by expected profit.

Reliable income

Yielding 3.5%, power provider National Grid (LSE: NG.) completes our trio of income stocks doing well. Up 20% so far, this traditionally ‘boring business’ has now hit a record high.

Now, I’ve always regarded this as a potential cornerstone of any dividend-focused portfolio. In addition to regular-if-modest hikes to the total amount of cash returned, our constant need for gas and electricity makes this one of the most defensive businesses around.

It’s not a slam-dunk investment, though. Like Vodafone, the Grid has a huge debt pile, primarily due to the cost of maintaining its infrastructure. A price-to-earnings (P/E) ratio of 18 also makes National Grid shares the most expensive of the three.

As more money seems to be flooding into UK and European stocks from across the pond, however, I think the price might just continue going up.

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That has brought the dividend yield down to 3.3% — still slightly above the FTSE 100 average.

What has driven this share price turnaround – and could there still be more to come?

A growth story again

Three decades ago, Vodafone was a great British growth story.

It built up a big global operation through ambitious acquisitions. A soaring share price means Vodafone’s market capitalisation is now £27bn. However, that is still a far cry from its peak of over £250bn all the way back in 2000.

As I see it, part of the reason for Vodafone’s surging share price in the past year has been the re-emergence of a growth story after years when the company has been slimming down, selling off some of its Continental European operations.

That growth story has been mobile money in Africa.

This is already big business and could potentially get a lot bigger yet. The stock market has noticed. While Vodafone shares have surged in the past 12 months, they have been left in the dust by the 151% gain during that period for the Airtel Africa share price.

As investors have scrambled to get into the African mobile money opportunity, Vodafone has benefitted. It has an extensive African business footprint and 94m financial services customers across the continent.

Vodafone’s core business remains attractive

I also think the Vodafone share price has benefitted from investors reconsidering its core business.

For years, with the share selling for pennies, it was easy to point to some of the company’s challenges: a debt pile, pricing competition, high capital expenditure needs, and other factors that helped to make the company’s long-term financial prospects seem mixed.

But, then as now, there was also a lot to like. The City seems to be paying more attention to the positive side of the investment case again.

Vodafone is the largest or second-largest player in many markets, it has a strong brand, and the company’s technical expertise runs deep. It generates sizeable operating free cash flows. Those came in at over €5bn in the first half of its current financial year alone.

One to consider

The African mobile money opportunity is attractive and that could mean competition increases. Vodafone’s existing infrastructure and customer base give it an advantage. But that could be weakened over time if rivals do well.

Net debt has been reduced, but at €26bn it remains substantial. That is a risk to profitability as the debt needs to be serviced and ultimately paid off.

Still, even after the Vodafone share price’s outstanding performance over the past year, it remains 4% lower than five years ago.

I see ongoing potential here and reckon investors should consider the share.

The post The Vodafone share price is up 71% in a year. What’s going on? appeared first on The Motley Fool UK.

In fact, the latest numbers suggest there could still be a substantial gap between the market price and the company’s underlying worth. This is important to the profits of long-term investors, as assets tend to trade to their ‘fair value’ over time.

So how big does this crucial price-to-value gap look in Vodafone’s case?

Earnings growth

Earnings (profits) growth is the powerhouse of any company’s share price over the long run.

A risk to Vodafone here is the intense competition in the telecoms sector that could squeeze its margins. Even so, consensus analysts’ forecasts are that Vodafone’s earnings will grow by a standout 45.9% average a year to end-2028.

Its fiscal-year 2025 results saw service revenue grow 5.1% organically year on year to €30.8bn (£26.9bn). Adjusted earnings before interest, taxes, depreciation, amortisation, and leases (EBITDAaL) climbed to €11bn, improving margins to 30%.

Crucially, free cash flow was €2.5bn, beating guidance and highlighting that ongoing restructuring efforts are paying off. These involve simplifying the group, improving profitability, reducing debt, and refocusing on markets where it can grow.

In its Q3 2026 results released on 5 February, it said it is on track to deliver at the upper end of our guidance range for both profit and cash flow. For the former, the range is €11.3bn-€11.6bn, while for the latter it is €2.4bn-€2.6bn. It also announced a new €500m share buyback, which tends to support share price gains.

Are the shares cheap to peers?

Despite its recent price rise, Vodafone is still at the bottom of its competitor group on the key price-to-sales ratio. It trades at just 0.8 compared to the 1.5 average of these peers.

These comprise BT at 1, Orange at 1.1, Deutsche Telekom at 1.2, and Telenor at 2.7. So Vodafone looks very cheap on this basis.

The same is true of its price-to-book ratio of 0.6 — again bottom of its peer group, which averages 2.2.

How much of a bargain is it?

To nail down exactly what the stock’s true worth is, I ran a discounted cash flow (DCF) analysis. This uses consensus analysts’ earnings growth forecasts to project long-term cash flows that are discounted back to today.

Let us assume that these forecasts are right — although they are not set in stone, and other DCF analyses may use different inputs that may produce different results. My modelling — using a discount rate of 7.4% — estimates Vodafone’s ‘fair value’ could secretly be close to £2.02 per share. That is almost double where the stock trades today.

This is important, as asset prices typically gravitate towards their fair value in the long run. So this suggests a potentially terrific buying opportunity to consider today if those analyst forecasts prove accurate.

My investment view

I would consider buying Vodafone if I did not already hold BT. Adding another telecoms stock would skew my portfolio’s risk-reward balance.

But for investors without that issue, Vodafone’s exceptional earnings‑growth outlook and large valuation discount make the stock well worth considering, in my view.

The post Here’s why Vodafone’s sub-£1.15 share price looks cheap to me anywhere below £2.02 appeared first on The Motley Fool UK.

But of course, past performance doesn’t guarantee future results. So the question now becomes, can Vodafone maintain its current momentum and climb even higher throughout the rest of 2026?

The bull case

Following the recent completion of its merger with Three UK, Vodafone’s currently on track to enjoy an estimated £700m in synergy benefits. Meanwhile, in its core German market, after years of decline due to competitive pressure, growth has finally returned for two consecutive quarters, marking a potential inflexion point.

Combined with the continued strong performance of its fintech operations in Africa, investor sentiment surrounding Vodafone has notably improved. And with the shares trading at an exceptionally low valuation a year ago, it’s hardly a surprise to see such rapid share price expansion.

Today, the bull case rests on management continuing to deliver a robust turnaround.

Its latest results, while positive, were a tad weaker than expectated due to tough year-on-year UK comparisons. However, in terms of underlying earnings and free cash flow, Vodafone remains on track to hit full-year expectations, paving the way for a further welcome debt reduction.

The bear case

While Vodafone’s outlook is becoming more positive, there nonetheless remains some significant challenges and headwinds to overcome.

Its German operations may have returned to growth, but only by a marginal 0.7%. And management still has plenty of work left to do in recapturing previously lost market share.

Needless to say, that’s a lot easier said than done. And the challenge is only amplified by the firm’s still-substantial €51.5bn debts & equivalents, as well as £11bn committed UK investment capex as part of its Three UK merger agreement with regulators.

In other words, with the bulk of free cash flow allocated towards deleveraging and UK infrastructure upgrades, management’s financial flexibility in Germany might be too limited to aggressively compete against local rivals.

The bottom line

The recent price rally’s pushed Vodafone shares to their highest level since 2022. But the stock nonetheless remains significantly below the highs seen in 2018 and is priced pretty cheaply against expected underlying earnings of €11.3bn for its 2026 fiscal year (ending in March).

So is this a buying opportunity? Vodafone shares remain on a pretty short leash at the moment. The company has a long track record of missing expectations, particularly in Europe, so investors are understandably wary of any signs of weakness, given that trust with previous management teams has been broken repeatedly.

However, for long-term investors willing to be patient, the recent stronger results might warrant a deeper investigation.

The post Up 60%, can Vodafone shares continue to rally in 2026? appeared first on The Motley Fool UK.

But deciding which ones to buy isn’t always straightforward. After all, a falling share price could be a sign of a fundamental problem. However, this isn’t always the case. Sometimes, a stock becomes unloved due to some temporary issues that aren’t going to last.

Here’s one big name that’s seen its stock market valuation tank over the past three years. But is it a value trap or a bit of a bargain? Let’s take a closer look.

A former number one

Just over 26 years ago, on 17 January 2000, Vodafone’s (LSE:VOD) shares rose 6.7% to 351p making it the most valuable company on the FTSE 100. At the time, the telecoms group was valued at £109.1bn. How times have changed. Today (6 February), it has a market-cap of £25.5bn. On this basis, I think it comfortably meets the definition of a fallen giant.

And after a painful and prolonged period of restructuring, there are signs it’s starting to turn the corner. The group’s exited a number of markets, most notably in Spain and Italy, in a bid to improve its return on capital. In the UK, it’s merged its operations with Three. As a consequence, VodafoneThree’s now the country’s largest mobile network with 28m customers.

As a sign of confidence, it’s also increased its interim dividend for the year ending 31 March 2026 (FY26) by 2.5%. It hopes to do the same for its final payout. If it does, it means the stock’s forward yield is 3.7%.

Latest update

On Thursday (5 February), the group published its Q3 FY26 trading update. It said it expected its full-year result and free cash flow to be at the upper end of guidance. It reported “good service revenue momentum” in Europe, Africa, and Türkiye. Importantly, in Germany, there was growth for the second successive quarter. The group’s been struggling here due to a change in law that prevents landlords from bundling television contracts with tenancies.

However, investors weren’t impressed. The shares closed the day 4.7% lower. I suspect they didn’t like the fact that the group’s quarterly organic service revenue growth was 5.4%, compared to 5.8% for Q2. Alternatively, some shareholders might have cashed out after a recent mini rally.

My view

But in my opinion, I still think the group’s shares offer good value. Both earnings and cash flow are going in the right direction. And although the group’s service revenue growth slowed in the quarter, I’m mindful that recoveries are rarely smooth. IG’s chief market analyst was positive, describing Vodafone’s performance as “one of the FTSE’s more impressive turnaround stories”.

However, opinion among analysts appears divided. In January, Deutsche Bank set a new 12-month price target of 150p. Citi raised its own to 100p. The consensus is 104p, around 4% lower than the current share price. 

Although the group still faces some significant challenges, not least fierce competition in its key markets and a high-ish debt pile, I’ve seen enough to believe that the stock’s worth considering by patient long-term investors. I doubt it will ever be the FTSE’s number one again but I’m optimistic it will climb up the charts over the coming years.

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And in the UK, organic sales revenue declined 0.5% (following a 1.2% increase in Q2). But the company said that was expected. And that the “integration of VodafoneThree is progressing well and firmly on track.“

Looking at the wider picture, Vodafone saw total revenue increase 6.5% from the same quarter a year ago, to €10.5bn. Service revenue gained 7.3%. And adjusted EBITDAaL (a variant on EBITDA that allows for some one-off items) rose 2.3%.

The company highlighted its share buyback progress, having returned €3.5bn to shareholders by that route so far this financial year. And on the same day, we had the announcement of a further buyback of up to €500m, due for completion by 11 May.

What will the year bring?

With just the final quarter to go, Vodafone is still upbeat in its guidance for the full year. CEO Margherita Della Valle said: “Looking ahead, we are on track to deliver at the upper end of our guidance range for both profit and cash flow.”

To reiterate, that’s the upper end of €11.3bn to €11.6bn in adjusted EBITDAaL, with adjusted free cash flow between €2.4bn and €2.6bn. And the board still expects to grow its full-year dividend by 2.5%. That should mean a yield of around 3.5% on the closing share price Wednesday.

Are Vodafone shares cheap?

The Vodafone share price has had a strong run of late, up 64% in the past 12 months. But that does follow a steady decline, and we’re still looking at a five-year fall of 19%. The stock did get overheated, back in the days Vodafone was paying twice the dividend level of today — and the inevitable reset happened in the 2024-25 year.

Looking beyond the healthy expectations for 2025-26, analysts predict a further 35% rise in earnings per share by 2028. And they expect the dividend to be 10% ahead of last year’s payment by then.

We’ll surely need some long-term improvement in underlying performance to go much further. If we don’t get it, the Vodafone share price might just be coming back from a bit of undervaluation. And then more years of stagnation?

Change at the top

I expect more than that. And it’s all down to Margherita Della Valle taking control in 2023. Prior to her arrival, Vodafone seemed to be just shuffling things around and hoping something good might drop out.

But now, gone are those loss-making operations in Spain and Italy. I see the Three merger as adding long-term value. And even Germany, while maybe a bit disappointing this time, is turning positive.

With a forecast price-to-earnings (P/E) ratio of 17.5, dropping to 13 by 2028, Vodafone is a solid long-term consideration in my book.

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The most enthusiastic of them has a target price of 149p on the stock. That’s a 43% increase on the price at the time of writing Monday (26 January). But at the other end of the range, there’s a low target of just 64p. And that could mean a whopping 61% fall. This wildly uncertain range doesn’t seem to tie in with actual profit forecasts to me. So let’s have a look at what they say.

If the City experts are right, we should see Vodafone’s earnings per share increasing 140% between 2024 and 2028 (with 2025 recording a one-off loss). Analysts predict a more modest 10% dividend rise from 2025’s rebased level to 2028. With a bit of luck, it should beat inflation — assuming that comes down between now and then.

Predicted cover by earnings of 1.6 times in 2026 would rise to around 2.1 times if the experts are right. We do, however, have to bear in mind that’s far from certain. Experts are, in fact, often wrong. Still, it does paint an upbeat picture of the prospects for the Vodafone share price in the next few years. And so far, I’m siding with the more optimistic analysts.

Upper end of guidance

It also fits in with the company’s own positive guidance: “Based on our stronger performance, we are now expecting to deliver at the upper end of our guidance range for both profit and cash flow, and as our anticipated multi-year growth trajectory is now under way, we are introducing a new progressive dividend policy, with an expected increase of 2.5% for this financial year.”

Those were the words of CEO Margherita Della Valle at the interim stage. She was referring to a guidance range of €11.3bn to €11.6bn in EBITDAaL (a measure of EBITDA adjusted for lease-related and some other items) and free cash flow between €2.4bn and €2.6bn.

With all this cheeriness, is Vodafone a clear no-brainer buy?

Hold on a minute

Investing decisions are rarely that easy. And if they seem that way, I generally assume I’m missing something. The company is still struggling with weakening service revenue in Germany — though there are signs of improvement.

And debt and valuation are real concerns for me. We’re looking at a forecast price-to-earnings (P/E) ratio of 16. That’s fine, we might think. But net debt of €25.9bn (£22.5bn) is close to the company’s entire market cap. Adjusting for it pushes the effective P/E up to 31!

Still, if earnings do grow as well as predicted, we could see increasingly more attractive valuations in the coming years. And on the basis of that, I reckon Vodafone has to be worth considering.

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Vodafone was weighed down by heavy debt, sluggish revenue growth and weak performance in key markets, especially Germany. Competition was fierce, regulation tight and pricing power limited. Its sprawling empire badly needed trimming back, with Spain and Italy dragging on results. The board seemed locked into endless restructuring, with little to show for it.

Income hero, growth zero

For a while the dividend yield topped 10%, making it one of the biggest payers on the FTSE 100, but that was clearly unsustainable. The last dividend increase came in 2018. It was then cut by 40% in 2019, frozen for five years, and slashed again by 50% last year.

At that point, I assumed Vodafone would drop out of the index and keep falling. After watching it closely for years, I stopped paying attention. Naturally, that’s when it took off. The shares are up 45% over the last year.

Add in the trailing dividend yield of 3.8% and the total return comes to 48.8%. A £10,000 investment a year ago would now be worth £14,888. That’s a dramatic turnaround by any measure.

FTSE 100 comeback kid

The change in fortunes reflects the impact of group chief executive Margherita Della Valle, who assumed the top job in April 2023. Under her leadership, Vodafone has sold its underperforming Spanish and Italian units, and moved forward with a major merger of its UK business with Three. German revenues have begun to return to growth after years of declines.

The slimmer group has freed up cash, allowing Vodafone to reduce debt and launch a €4bn share buyback programme. It’s also reinstated a progressive dividend policy after years of disappointment.

First-half results on 10 November showed revenue up 7.3% to €19.6bn. Management now expects to deliver results at the top end of its 2026 guidance, with underlying free cash flow of between €2.4bn and €2.6bn.

Solid valuation

Despite the strong run, Vodafone’s valuation doesn’t look stretched. The price-to-earnings ratio stands at 14.7, with a forecast P/E of around 12. The forward yield for 2026 is pencilled in at 4.18%.

Even so, I’m cautius. Net debt actually rose in the six months to November, up more than 15% to €25.9bn, driven by the Three merger. Telecoms remains a capital-hungry, competitive industry, where companies must pump huge sums of cash into building fibre networks and the 5G spectrum. Also, recent progress in Germany may be hard to sustain but the investment remains huge. Africa may offer an exciting growth opportunity though.

The shares are still down around 20% over five years, so further recovery is possible. Investors might consider buying, but my gut feeling is that Vodafone still has something to prove.

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