Is Vodafone a Winner or a Loser?

With shares of Vodafone Group Public Limited Company (NASDAQ:VOD) trading at around $25.05, is VOD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Vodafone has approximately 407 million customers. Therefore, this is a company that won’t be going anywhere anytime soon. Vodafone also has a profitable 45 percent stake in Verizon Communications Inc. (NYSE:VZ). Other positives include diversification, a focus on returning capital to shareholders, an expectation of improved margins, strong cash flow (though not as strong as in the past), and an average analyst price target of $31.60.

On the negative side, the subscriber count has been decreasing, especially in Europe, which is the biggest negative. Other negatives include poor margins, declining revenues on an organic basis, pricing pressures, and an unsteady global economy (once again, especially in Europe).

Now let’s take a look at some important numbers prior to forming an opinion on this stock.

E = Equity to Debt Ratio Is Normal            

The debt-to-equity ratio for Vodafone is normal and stronger than the industry average of 0.80. The balance sheet is in negative territory, but operating cash flow is $18.69 billion.

T = Technicals on the Stock Chart Are Weak      

Over a one-year timeframe, Vodafone has performed poorly in a strong market. This is rarely a good sign for near-future potential. And momentum hasn’t improved as of late. Year-to-date, Vodafone has underperformed Verizon and AT&T (NYSE:T). Of these three companies, AT&T offers the most impressive dividend yield at 5 percent. Verizon yields 4.50 percent. Vodafone yields 4.10 percent.

At $24.55, Vodafone is currently trading below all its averages.

E = Earnings Have Been Steady                   

Earnings have been steady yet unspectacular on an annual basis.

Unfortunately, we don’t have the quarterly information for the last five quarters. However, much of the information in the Catalyst section referred to the last quarter’s results.

Let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

This is basically a matter of growth in mobile versus global economic weakness. It’s difficult to determine which will have more of an impact going forward.

If you’re looking far out into the future, then you might be happy to know that Vodafone expects to be a big player in the mobile machine-to-machine trend. This pertains to machines talking to one another via mobile, and it will be found in energy, automobiles, health, and more.

Conclusion

Vodafone isn’t the strongest company in the world at the moment, but it has staying power, and the longer it hangs around, the closer it will get to achieving its goals. However, a declining subscriber count is a serious concern that shouldn’t be ignored.

If risks and rewards cancel each other out and the stock treads water around these levels for the foreseeable future, then investors will still be doing well thanks to the 4.10 percent yield. Therefore, Vodafone isn’t the worst option out there. At the same time, it’s far from the best.

Vodafone is a WAIT AND SEE.

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