For years, Vodafone’s (LSE: VOD) share value has been weighed down by heavy debt, regulatory shocks in Germany, and underperforming Spanish and Italian marketplaces.
Traders grew accustomed to dividend cuts, portfolio reshuffling, and a share value that appeared trapped close to multi-year lows.
However after these years of disaster administration, a clearer technique seems to be rising. This consists of exiting weaker geographies, decreasing leverage, and specializing in development engines in Africa, Turkey, and the UK.
So the query is how a lot its earnings are set to develop and the way excessive may this push the share value?
Strategic shift mirrored in outcomes
The fiscal-year 2025 outcomes noticed service income develop 5.1% organically yr on yr to €30.8bn (£26.9bn). This underlined that the agency may ship development even after years of stagnation.
Whole income rose 2% to €37.4bn, whereas adjusted earnings earlier than curiosity, taxes, depreciation, amortisation, and leases (EBITDAaL) climbed to €11bn. This improved margins to 30%.
Crucially, free money move was €2.5bn, beating steering and demonstrating that the restructuring efforts are paying off. This might be a significant driver for development.
The stability sheet additionally confirmed progress, with internet debt having been decreased by round €11bn over two years. This was pushed by asset gross sales, together with exits from Spain and Italy — two markets that had lengthy dragged on efficiency.
The primary half of the fiscal yr 2026 numbers, launched 11 November, confirmed double-digit development sustained in rising markets. General income climbed 7.3% to €19.609bn.
Strategically, the merger with Three – to create ‘VodafoneThree’ — was highlighted as making a “quick begin”. Nonetheless, any main failure in integration stays a key danger that might be expensive by way of cash, service, and status.
Essential earnings development outlook
Earnings (development is the important thing long-term driver for any agency’s share value and dividends.
Within the H1 2026 numbers, Vodafone stated it now expects to ship on the higher finish of its steering ranges. These are: adjusted EBITDAaL of €11.3bn-€11.6bn and adjusted free money move of €2.4bn-€2.6bn.
Right here, the merger with Three UK might be transformative, giving Vodafone scale to compete extra successfully towards BT and Virgin Media O2. In the meantime, Africa and Turkey proceed to supply robust development.
Vodafone’s largest market – Germany — hit by regulatory adjustments round bundling TV contracts, stays the litmus take a look at. Nonetheless, bettering buyer satisfaction scores recommend the groundwork for restoration is being laid.
Given these elements, analysts forecast Vodafone’s earnings will develop a shocking 55% a yr to 2028.
So, how undervalued are the shares?
On the important thing price-to-sales ratio, Vodafone’s 0.7 is backside of the group of its opponents, which averages 1.3. These are BT at 0.9, Orange at 1, Deutsche Telekom at 1.1, and Telenor at 2.4.
The identical is true of its 0.5 price-to-book ratio in comparison with its friends’ common of 1.9.
A reduced money move evaluation exhibits its shares are 60% undervalued at their present 95p value. This means their ‘truthful worth’ is £2.38.
That is vital, as asset costs are likely to commerce to their truthful worth over time.
My funding view
I already maintain BT shares, so one other telecoms inventory would unbalance my portfolio.
Nonetheless, I imagine that Vodafone’s huge earnings development potential ought to spark a significant long-term upwards re-rating of its share value.
Consequently, I believe it value consideration by different buyers.
