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Investing in FTSE 100 Value sharing provides an opportunity for stock pickers to maximize their long-term returns. The theory is that undervalued companies may come back stronger as market sentiment improves, bringing huge positive returns in the process.
Vodafone Group (LSE:VOD) is one cheap-as-chips Footsie stock on my radar today. Its shares appear to offer exceptional value across a range of metrics, including forecast earnings and dividends, as well as its asset value.
While it’s not without risk, that’s why I think Vodafone shares are worth a closer look by value investors.
Salaries
First we’ll look at how the telecoms titan stacks up using the price-to-earnings (P/E) ratio.
For this financial year (until March 2025), Vodafone has a P/E of 9.9 times. To put that in context, the FTSE 100 average sits at 14.3 times.
But how does this compare to learning in the wider field? As the table shows, Vodafone also scores well in this metric compared to other major industry players.
| Company | The forward P/E ratio |
|---|---|
| Telefonica | 15.1 times |
| an orange | 9.7 times |
| Deutsche Telekom | 16.4 times |
| I&T | 10.5 times |
| Verizon Communications | 9.6 times |
| IT-Mobile | 25.9 times |
Assignments
Telecoms companies are famous for offering large dividends due to strong, recurring revenue and high cash flow.
In early 2024, Vodafone announced plans to recapitalize its assets to reduce debt. Yet despite this, the forward dividend yield, at 6.3%, is still higher than the Footsie average of 3.6%.
In addition, the yield on Vodafone shares also exceeds the corresponding readings of many of its industry rivals.
| Company | Forward dividend yield |
|---|---|
| Telefonica | 6.9% |
| an orange | 7.4% |
| Deutsche Telekom | 2.9% |
| I&T | 4.9% |
| Verizon Communications | 6% |
| IT-Mobile | 1.2% |
Goods
The last thing I consider is how cheap Vodafone shares are relative to their book value. This is the value of the company’s total assets minus total liabilities.
Today the price-to-book (P/B) multiple is around 0.4. This fits well under the price watermark of one.
Time to consider buying?
So all in all, Vodafone leads very well. But surely there must be a catch? After all, the company’s share price has fallen 54% in the past five years, indicating potential internal and/or external problems.
Arguably the biggest concern is the size of the company’s debt pile. Excluding recent funding cuts, this has remained flat at 31.8 billion since September.
This could have a significant impact on Vodafone’s growth plans and limit future earnings. Considering how capital-intensive its operations are, such high debts are particularly troubling.
However on balance, I believe the potential benefits of owning Vodafone shares may outweigh the risks. It is still facing problems in Germany following changes in service integration rules. But sales are rising sharply in other European regions, not to mention Africa (where revenue in the first quarter rose by 9.7%).
Vodafone’s efforts to refocus its Business division are also paying off, with revenue growth accelerating to 4% in the six months to September.
With its scale and market-leading product, I think Vodafone could be a good way for investors to capitalize on the growing digital economy in the long term. At current prices, I think it needs serious consideration.
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