Vodafone’s (LSE: VOD) share price tumbled following the 12 November launch of its H1 2025 outcomes. To me although, the market response seemed overdone.

Certainly, round 18 months right into a deep firm reorganisation, the numbers appeared much more promising than I had anticipated.

The (unhealthy?) H1 outcomes

The telecoms big’s income rose 1.6% to €18.3bn (£15.3bn) yr on yr. Its working earnings shot up 28.3% to €2.4bn. And its adjusted core earnings elevated 3.8% to €5.4bn.

The geographical refocusing of its reorganisation has progressed. Spanish and Italian asset sale offers accompanied the provisional regulatory approval of its merger with UK cellular competitor Three. The ultimate choice on the deal from the competitors regulator can be made on 7 December.

And Vodafone additionally reiterated its full-year 2025 steering of core earnings of round €11bn and adjusted free money circulate of no less than €2.4bn.

What prompted the detrimental market response was Q2’s 6.2% fall in service revenues in Germany – its largest market. Nonetheless, this was largely attributable to a change in German TV regulation past Vodafone’s management.

One key danger within the inventory for me is the extraordinary competitors within the telecoms sector that might squeeze Vodafone’s revenue margins. One other is a veto by the regulator of its proposed merger with Three.

Are the shares undervalued?

To find out whether or not any inventory is undervalued, I start by taking a look at its price-to-earnings ratio (P/E) in comparison with its rivals.

 Vodafone is on the backside of this group, with a P/E of simply 9.2 towards a competitor common of 19.1. So, it is extremely undervalued on this foundation.

The identical is true relating to the price-to-book ratio, on which it trades at 0.4 towards a 1.7 peer common. And it additionally appears very low cost on the price-to-sales ratio at 0.6 in comparison with a competitor common of 1.2.

To seek out out what this implies in share price phrases, I ran a discounted money circulate analysis. This exhibits Vodafone shares are 55% undervalued at the moment price of 70p.

So a good worth for the inventory is £1.56, though it could by no means attain that determine. It might go decrease or greater.

Will I purchase the inventory now?

I feel CEO Margherita Della Valle’s turnaround plan could properly succeed over time. Nonetheless, I’m within the latter a part of my funding cycle, aged over 50 now.

This has seen me promote almost all my out-and-out progress shares and concentrate on shares yielding 7%+. The concept is that I reside off the dividends whereas lowering my workload.

I perceive the deserves for Vodafone of halving its dividend subsequent yr from the earlier 9 euro cents because it has. Nonetheless, the roughly 5% yield it’ll supply doesn’t meet my minimal requirement.

Moreover, I’ve hardly ever purchased shares priced beneath £1 at any level in my funding cycle. And those I did, I regretted. The reason being that every penny represents a comparatively excessive proportion of the share’s general worth. This provides greater pricing volatility danger to the opposite dangers related to any inventory.

Nonetheless, if I used to be simply beginning out investing and fewer averse to taking such a danger, I’d see Vodafone as a doable purchase.