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Vodafone (LSE: VOD) shares have been climbing quick this time final 12 months, leaping 15% in a matter of weeks. It was the primary signal of life from the FTSE 100 telecoms group in years, and I used to be tempted to take a better look.
So I did. And after weighing up the numbers, the debt, the dividend outlook and the long-term share worth development, I got here to a transparent conclusion. I wasn’t shopping for.
For me, the dangers nonetheless outweighed the potential.
I’ve been a Vodafone sceptic for a very long time and didn’t see sufficient within the restoration story to change my mind. I wasn’t drawn in by the then-tempting 10.4% yield, realizing that it wouldn’t survive.
Nor was I satisfied the long-promised turnaround was lastly underneath manner. I mentioned I wouldn’t contact Vodafone shares with a bargepole. So, did I make the correct name?
A lukewarm comeback
A fast look on the Vodafone share worth calms the nerves. Over the previous 12 months, the inventory is up simply 2.8%. Not dangerous by its personal requirements, particularly given the latest volatility. However it nonetheless lags the FTSE 100, which is up 6.2% over the identical interval.
FTSE 100 rival BT Group delivered a 40% share worth surge within the final 12 months, exhibiting what a correct telecoms turnaround can appear to be. Vodafone merely hasn’t matched that.
It does have its strengths. The trailing yield remains to be first rate at 4.9%, comfortably above the index common of round 3.6%.
It isn’t that costly both, with a price-to-earnings ratio of 11.6.
Combined indicators
The group’s 2024 outcomes, revealed on 20 Could, painted a combined image. Complete income rose 2% to €37.4bn, with natural service income up 5.1%.
There was sturdy progress in Africa and Turkey, however a 5% decline in Germany as a consequence of more durable regulation and fierce competitors. Vodafone suffered a €400m working loss, though it wasn’t helped by a €4.5bn impairment cost.
The board did announce a €2bn share buyback although. That ought to help the share worth within the brief time period.
CEO Margherita Della Valle insisted Vodafone has “changed”, however I nonetheless have to see extra proof
Watch and wait
Telecoms stays a tough sector. It calls for heavy funding and provides little room for error. Vodafone’s web debt stays stubbornly excessive at €33.9bn. The turnaround story is actual, nevertheless it’s not but full.
Analyst sentiment displays the uncertainty. Of the 15 providing inventory rankings, 4 say Purchase, 4 say Promote and the remainder are sitting on the fence. That’s the most important Promote ratio I’ve seen for some time.
Analysts forecast a median one-year share worth goal of simply over 85p, a modest 10% achieve from as we speak’s worth. Mixed with the yield, that may supply a 15% return. That might be a superb 12 months by Vodafone’s requirements. We’ll see.
In a single respect, the shares we don’t purchase are simply as vital as those that have been. So it’s price wanting again, once in a while. Hopefully, not with anger.
For now, I nonetheless see higher locations to speculate. Others may think about shopping for Vodafone, however I’m protecting my bargepole helpful.
| CoinFN
