We've been asking ourselves recently if the market has placed a fair valuation on Vodafone. Let's dive into some of the fundamental values of this large-cap Telecommunications company to determine if there might be an opportunity here for value-minded investors.
The Market May Be Undervaluing Vodafone's Assets and Equity:
Vodafone Group Public Limited Company provides telecommunication services in Europe and internationally. The company belongs to the Telecommunications sector, which has an average price to earnings (P/E) ratio of 18.85 and an average price to book (P/B) ratio of 3.12. In contrast, Vodafone has a trailing 12 month P/E ratio of 2.0 and a P/B ratio of 0.81.
Vodafone has moved -40.3% over the last year compared to 17.1% for the S&P 500 — a difference of -57.0%. Vodafone has a 52 week high of $15.93 and a 52 week low of $9.0.
Overview of the Company's Finances:
| 2020-03-31 | 2021-03-31 | 2022-03-31 | 2023-03-31 | |
|---|---|---|---|---|
| Revenue (MM) | $44,974 | $43,809 | $45,580 | $45,706 |
| Gross Margins | 31.8% | 31.3% | 32.9% | 32.5% |
| Operating Margins | 19.9% | 12.4% | 13.2% | 31.8% |
| Net Margins | -2.05% | 0.26% | 4.58% | 25.9% |
| Net Income (MM) | -$920 | $112 | $2,088 | $11,838 |
| Net Interest Expense (MM) | -3,549 | -1,027 | -1,964 | -1,728 |
| Net Interest Expense (MM) | -$3,549 | -$1,027 | -$1,964 | -$1,728 |
| Depreciation & Amort. (MM) | -$14,174 | -$14,101 | -$13,845 | -$13,618 |
| Earnings Per Share | -$0.31 | $0.02 | $0.77 | $4.62 |
| EPS Growth | n/a | 106.45% | 3750.0% | 500.0% |
| Diluted Shares (MM) | 2,942 | 2,968 | 2,911 | 4,533 |
| Free Cash Flow (MM) | $9,774 | $8,575 | $9,021 | $8,841 |
| Capital Expenditures (MM) | -$7,605 | -$8,640 | -$9,060 | -$9,213 |
| Net Current Assets (MM) | -$71,292 | -$68,977 | -$68,439 | -$60,376 |
| Current Ratio | 1.02 | 0.98 | 0.85 | 0.89 |
| Long Term Debt (MM) | $62,892 | $49,363 | $48,321 | $41,351 |
| Net Debt / EBITDA | 3.4 | 2.72 | 2.75 | 1.6 |
Vodafone has stable revenues and increasing reinvestment in the business and exceptional EPS growth. Additionally, the company's financial statements display a steady stream of strong cash flows and healthy leverage. However, the firm has slimmer gross margins than its peers. Finally, we note that Vodafone has average net margins with a positive growth rate.
