Exit Price28 May 2024 13:16
My average is 88p and like to exit around 132p for a 50% return. Prob have broken even with all the divis over the years. Following article seems to suggest this is achievable. What are others exit price target?
Article on Fool:
1. Earnings
Vodafone’s going through a restructuring exercise. If all goes to plan, it will soon dispose of its business in Spain followed by its Italian division.
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Excluding these, the company reported a profit after tax for the year ended 31 March (FY24) of €1.57bn.
With a current market-cap of £20bn (€23.4bn at current exchange rates), the company’s trading on a historical price-to-earnings ratio of 14.9.
The three most valuable telecoms companies in Europe, Deutsche Telekom (Germany), Orange (France) and Swisscom (Switzerland), have historical earnings multiples of 16.3, 10.7 and 15 respectively.
Applying the average of these (14) to Vodafone’s FY24 earnings implies a stock market valuation of €22bn (£18.8bn).
Using this measure, the company’s share price should be 69.5p — 5.4% lower than its current value.
2. Assets and liabilities
At 31 March, the company had a book (accounting) value of €61bn (£52bn).
In other words, this would be the amount left to return to shareholders if it sold all of its assets for the amounts stated in its accounts, and used the proceeds to clear its liabilities.
This is equivalent to 192p a share — a 160% premium to its current stock price.
3. Enterprise value
Finally, I’ve looked at Vodafone’s enterprise value. This is a popular measure in the world of mergers and acquisitions as it represents the theoretical amount that someone would have to pay to buy a company. That’s because it includes debt which an acquirer would either take on or repay.
Enterprise value is calculated by adding a company’s market-cap to its borrowings and then deducting any cash.
At 31 March, Vodafone’s net debt — excluding Spain and Italy — was €33.2bn (£28.3bn). Add this to its current stock market valuation and its enterprise value is €56.6bn (£48.3bn), or 179p a share.
Fair value?
The average of these three valuations is 147p. On this basis, I believe there’s a reasonable case to be made for claiming that the company’s shares are undervalued.
But investors appear concerned about Vodafone’s high level of borrowings and stagnant earnings.
However, I’m encouraged by the company’s restructuring plan that seeks to improve its return on capital employed by
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