The Vodafone (LSE:VOD) share price has been shedding floor over the previous few years. Within the final 5 years, it’s down 51%. Though the FTSE 100 veteran’s up a modest 4% within the final yr, it feels extra like treading water somewhat than an explosive restoration. But with some individuals calling this a discount proper now, I believed it worthwhile to take a more in-depth look.

Spiralling down

Let’s run by means of a few of the issues Vodafone’s endured which have pushed the share price down to present ranges. One massive concern’s been the quantity of debt.

The enterprise took on extra debt throughout the pandemic, however has struggled to meaningfully pay it down. For instance, the 2024 annual report confirmed web debt at €33.2bn, the identical stage it was a yr in the past. On condition that the agency generated a revenue earlier than tax of €1.6bn, it will be good to make use of some retained earnings to pay down the debt. But even when it used all of the revenue from final yr to take action, it nonetheless doesn’t make an enormous dent into the debt pile.

One other concern that has hampered the inventory is that Vodafone’s probably too massive and subsequently inefficient. It has tried to unravel this concern by lately exiting some markets, resembling Italy and Spain. I see this as a superb transfer for a extra streamlined future. But by way of understanding how the inventory reached the present stage, it’s undoubtedly been an element.

Indications of worth

One signal the inventory may very well be a discount proper now pertains to the €500bn share buyback introduced final week. Usually, it is smart for a corporation to purchase again the inventory when the price is affordable. In any case, shopping for when the share price is at all-time highs can be a pricey approach to make use of firm funds. So though it’s not a concrete purpose, the truth that Vodafone are launching a big buyback as a approach of distributing funds again to shareholders proper now’s fairly telling.

I really feel the inventory seems undervalued after I take into account the advantages in coming years of what a extra streamlined agency may seem like. In promoting off belongings from low development areas, it not solely banks money however can then focus extra consideration on markets the place development’s excessive.

We’ve already seen this with the €5bn sale late final yr of the Spanish operations. With the most recent quarterly outcomes exhibiting income in Turkey accelerating, pivoting from one space to a different may very well be a fantastic technique transfer. Over time, group income ought to improve whereas prices shrink, serving to to elevate the share price.

One to observe

Though I really feel there are extra apparent bargains within the inventory market proper now, I do just like the look of Vodafone shares in the meanwhile. I’m severely interested by including some to my portfolio.