The Vodafone (LSE:VOD) share price continues to lag the FTSE 100 as an entire. But when analysts are to be believed, the telecoms group’s at the moment undervalued by roughly 24%. That’s as a result of the common of their 12-month price targets is 87p, with a spread of 54.4p-142p.

Nonetheless, the consensus view disguises a distinction of opinion. Of the 16 ‘experts’ protecting the inventory, 5 are advising their purchasers to Purchase, 9 are Impartial and two are suggesting shareholders’ Promote.

Clearly, they’ll’t all be proper.

Monetary efficiency

On 20 Could, the group will report is outcomes for the yr ended 31 March (FY25). These are anticipated to point out EBITDAaL (earnings earlier than curiosity, tax, depreciation and amortisation, after leases) of €11bn (£9.4bn at present alternate charges).

Final yr, Swisscom purchased Vodafone Italy for 7.6 instances adjusted EBITDAaL. Apply this to Vodafone’s anticipated FY25 revenue, deduct the anticipated internet debt place on the finish of the monetary yr of €22.1bn (£18.9bn), and I believe a wise argument could possibly be made for the group to be valued at €61.5bn (£52.6bn). That’s a 305% premium to its present (16 April) market cap.

Even when we used a decrease a number of of 5.6, which Zegona Communications was comfortable to pay for Vodafone Spain, I consider a valuation of €39.5bn (£33.8bn) could possibly be justified. That’s round 95% larger than the group’s current share price.

Unloved

Nonetheless, regardless of these calculations, traders seem to have misplaced religion within the enterprise. At one level, it was the UK’s most precious listed firm. Since April 2020, Vodafone’s share price has been the third-worst performer on the FTSE 100.

A few of this has resulted from an absence of earnings development, each deliberate and in any other case. The corporate’s been promoting numerous under-performing divisions and non-core property, which is meant to make it extra environment friendly and scale back its debt burden. Nonetheless, its income and earnings are shrinking because of this.

Some unplanned occasions are additionally hurting the group. For instance, in Germany, its largest market, a regulation proscribing the bundling of tv contracts in house blocks means it’s dropping prospects.

An unclear image

With all these modifications, I believe it’s tough to know what a restructured Vodafone will appear like. And I ponder if this uncertainty is weighing on the group’s share price.

Vodafone intends to merge its UK operations with Three to create the most important cellular community within the nation. However British Metal’s well-documented issues may throw a spanner within the works. The chair of the Home of Commons overseas affairs choose committee has referred to as for the UK’s intelligence businesses to take a look at the function of China in Britain’s telecoms business. Three is finally owned by CK Hutchinson Group, which is listed in Hong Kong.

Nonetheless, even when the merger doesn’t progress, the group’s more likely to proceed producing loads of surplus money, a few of which it’s utilizing to repurchase its personal shares. And it’s doing notably effectively in Türkiye and Africa.

In fact, valuing firms is tough – I believe the broad variation within the figures mentioned above proves this. However in my view, the accessible proof means that the present Vodafone share price undervalues the corporate.

For that reason, I consider the corporate’s one for development inventory traders to contemplate.