Stock market

This FTSE 100 share looks too cheap to ignore!

Image source: Getty Images

Flag bearer FTSE 100 The leading stock index has some companies in it that look like the real deal to me.

Here I want to discuss a person who sells for money, has announced plans to cut his profits, has a large debt and is shrinking his business.

This may not sound like everyone’s idea of ​​a bargain!

So why do I think the share price in question looks much cheaper than I think it could be a few years down the line?

A fallen giant

is the part in question. Vodafone (LSE: VOD). It’s hard to remember how big and exciting the company was a quarter-century ago.

Not only has the FTSE 100 firm’s market capitalization fallen since then (although at around £18bn, it’s still substantial), the company is also getting smaller. Over the past few years, it has been selling some of its operations in various European markets.

This has generated cash that Vodafone can use to reduce its debt. I see this as a positive move, although the company is still taking on more debt than I would like.

But the decline in business impact could mean lower revenues and profits in the coming years.

Why I Like Share

As I see it, there are at least two very different ways of looking at this situation.

One would be to view Vodafone as a previously superior business that is now in long-term systematic decline. The cut in profits announced for next year is not the first.

The share price chart also looks sad, with the FTSE 100 firm seeing its shares more than halve over the past five years.

But another view would be to see Vodafone as lumbering with a share price that reflects old investor fears, while its current business strategy is actually positioning it for a bright future. Is.

Selling a unit and seeing a drop in revenue isn’t necessarily a bad thing in my book. If it successfully executes its strategic transformation, Vodafone should be more focused with a healthier balance sheet than ever before.

Customer demand is high, the company has a wide customer base and can also capture some exciting growth opportunities, such as the rapid expansion of mobile money usage in Africa.

Yes, the dividend is set to halve. But the current yield is 11.4%. Even at half that level, the yield would be well above today’s FTSE 100 average.

I’m catching up.

This explains why I have no plans to sell Vodafone shares.

I think they are cheaper than they should be and hopefully that’s where they can be in a few years.

With a big market, big brand and yet after earning a big dividend it’s half full, I see the cup as half full.


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button