Visually, the Vodafone (LSE: VOD) share price appears prefer it may very well be among the best buys on the FTSE 100. However is that actually the case?

It’s secure to say the final 5 years have been extraordinarily disappointing for the telecommunications large. Its shareholders received’t be proud of its efficiency. Throughout that point, the inventory’s misplaced 53.4% of its worth.

However now sitting at 75.6p, may we see the inventory carry out a turnaround within the instances forward?

Is it actually low-cost?

It’s troublesome to say whether or not the inventory actually is reasonable. The inventory market’s unpredictable. Nonetheless, one strategy to assess Vodafone is by taking a look at its valuation.

The inventory trades on a price-to-earnings (P/E) ratio of 20.9. In my eyes, that appears costly. By comparability, the FTSE 100 common is 11. That stated, wanting forward paints a greater image. Vodafone’s ahead P/E’s 9.9.

Whereas that appears like a lot better worth when in comparison with the FTSE 100 common, stacking Vodafone up towards its friends nonetheless highlights the inventory could also be costly. Take BT for instance. It presently trades on a P/E of 17.3, significantly cheaper than Vodafone. What’s extra, its ahead P/E is a mere 5.7.

A worth lure?

Based mostly on the above, I’m aware that even after dropping over 50% of its worth in 5 years, Vodafone should be expensive. May or not it’s the inventory’s a basic worth lure?

I believe there’s potential that it’s. Its long-term efficiency has been woeful. And even within the final 12 months when the FTSE 100 has rallied 8.6%, the telecoms stalwart’s inventory’s down 5.6%.

I may very well be unsuitable

Then once more, there’s the possibility I may very well be unsuitable. And below the management of Margherita Della Valle, the agency definitely has turnaround potential.

Since taking on in January 2023, Della Valle’s been on a streamlining mission. As a part of this, the agency’s offloaded companies in unprofitable areas comparable to Spain and Italy. For these, it raised €5bn and €8bn respectively. Alongside that, it’s turned its focus to areas with larger progress potential, comparable to Africa.

In an try to strengthen its steadiness sheet, the enterprise additionally took the choice to slash its dividend in half from subsequent 12 months. Previous to this transfer, Vodafone had one of many largest payouts on the FTSE 100. However whereas the choice to chop its dividend will see its payout fall considerably, the enterprise will save €1bn.

I believe that’s a wise transfer. But whereas it can assist shore up the agency’s books, I nonetheless see different points. For instance, it has a €33.2bn debt pile on its steadiness sheet. Transferring ahead, I’m involved this might stunt the agency’s progress.

My transfer

Whereas Vodafone could seem like a steal on paper, it’s a inventory I’ll be avoiding right this moment. Some could argue the enterprise has turnaround potential. Nonetheless, I’m anxious it may very well be a worth lure. I believe there are many different Footsie shares that current higher worth.