Vodafone’s (LSE: VOD) share price is down 15% from its 17 September one-year traded excessive of 79p.

Such a steep fall would possibly point out a cut price for these whose portfolios the inventory fits. Or it’d sign that the agency is simply value lower than it was earlier than.

I ran valuation measures and fashions I’ve trusted most in 30 years as a non-public investor to establish which it’s.

What does the share price imply in worth phrases?

The primary aspect in my pricing analysis is to check a agency’s key valuations with its opponents.

On the price-to-earnings (P/E) ratio, Vodafone presently trades at simply 8.7. That is backside of its peer group and means off their common P/E of 18.7.

This group contains Orange at 13.4, BT Group at 18.1, Telenor at 18.8., and Deutsche Telekom at 24.5. So, Vodafone shares look very undervalued on this measure.

The identical applies to its price-to-book ratio of solely 0.3 in comparison with its competitor common of 1.7. And it is usually true on the price-to-sales ratio, on which it trades at 0.6 in opposition to a 1.2 peer common.

Undervaluations on all three key measures are a particularly promising begin in my opinion. Nonetheless, the acid check is a reduced money movement (DCF) analysis. This examines the price a inventory ought to be, based mostly on its future money movement forecasts.

Utilizing different analysts’ figures and my very own exhibits Vodafone’s share price is 55% undervalued at its present 67p. So the honest worth per share is technically £1.49.

It could go decrease or increased than this resulting from market unpredictability, after all. Nonetheless, the clear sweep on key valuations and the robust DCF under-pricing affirm to me it could be an enormous cut price.

Does the core enterprise help this outlook?

H1 fiscal yr 2025 outcomes noticed whole income enhance 1.6% yr on yr to €18.3bn (£15.47bn). Analysts forecast Vodafone’s earnings will develop 3.19% a yr to end-2027. And it’s these that drive a agency’s share price and dividend over time.

I believe the principle danger to those is any mishandling of the merger with Three. This might negate the potential advantages of the now-approved deal, which might be appreciable.

Most notably for me these embrace the creation of a bigger community with sooner speeds and higher protection for purchasers.

Will I purchase the inventory?

A key think about inventory choice is appreciating one’s place within the funding cycle. The youthful one is, the longer the time a inventory has to recuperate from any price shocks.

Aged over 50 now, I’m on the later stage of that cycle. This implies I can not afford to take the funding dangers I might after I was youthful.

And a key danger for me on this context in Vodafone is its sub-£1 price. Which means every penny represents almost 1.5% of its whole worth. That’s too excessive a price volatility danger for me to take at my age.

That mentioned, if I had been even 10 years youthful I’d in all probability purchase the inventory now, based mostly on its earnings progress potential. If I had been of a extra cautious disposition, I’d wait to see how the merger with Three was progressing.