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.
Buyers 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, lowering leverage, and specializing in progress 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 12 months on 12 months to €30.8bn (£26.9bn). This underlined that the agency may ship progress even after years of stagnation.
Complete 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 movement was €2.5bn, beating steering and demonstrating that the restructuring efforts are paying off. This may very well be a serious driver for progress.
The stability sheet additionally confirmed progress, with web debt having been lowered 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 12 months 2026 numbers, launched 11 November, confirmed double-digit progress sustained in rising markets. Total income climbed 7.3% to €19.609bn.
Strategically, the merger with Three – to create ‘VodafoneThree’ — was highlighted as making a “quick begin”. Nevertheless, any main failure in integration stays a key danger that may very well be pricey when it comes to cash, service, and status.
Essential earnings progress outlook
Earnings (progress 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 movement of €2.4bn-€2.6bn.
Right here, the merger with Three UK may very well be transformative, giving Vodafone scale to compete extra successfully in opposition to BT and Virgin Media O2. In the meantime, Africa and Turkey proceed to supply robust progress.
Vodafone’s largest market – Germany — hit by regulatory adjustments round bundling TV contracts, stays the litmus check. Nevertheless, bettering buyer satisfaction scores counsel the groundwork for restoration is being laid.
Given these components, analysts forecast Vodafone’s earnings will develop a surprising 55% a 12 months 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 rivals, 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 movement evaluation exhibits its shares are 60% undervalued at their present 95p value. This means their ‘honest worth’ is £2.38.
That is crucial, as asset costs are inclined to commerce to their honest worth over time.
My funding view
I already maintain BT shares, so one other telecoms inventory would unbalance my portfolio.
Nevertheless, I consider that Vodafone’s huge earnings progress potential ought to spark a serious long-term upwards re-rating of its share value.
Consequently, I believe it price consideration by different traders.
