Image source: Vodafone Group plc
After a long period in the wilderness, the Vodafone (LSE:VOD) share price has been making steady progress. Since the start of 2025, it’s risen 25% and has remained above 80p since July. The last time it was consistently in the 80s was in the second quarter of 2023.
But I think there’s some evidence to suggest it could go higher still.
How to measure performance
Online valuation platform Equidam has compiled a database of earnings multiples in more than 30,000 listed companies. It says integrated telecommunications providers trade at an average of 9.5 times EBITDA (earnings before interest, tax, depreciation and amortisation).
Leaving aside the rights and wrongs of this particular measure of profitability — Warren Buffett says it’s a “very misleading statistic and it can be used in pernicious ways” — it’s relatively straightforward to calculate.
But most telecoms companies prefer to modify it slightly and report EBITDAaL, with the ‘aL’ meaning ‘after leases’. In a company’s accounts, some lease-related costs are reflected in depreciation and interest charges meaning they are excluded from the conventional EBITDA calculation.
For simplicity, I’m going to ignore the distinction as Vodafone doesn’t disclose ‘aL’. But including these additional costs means the amended measure’s going to be lower. I’m therefore erring on the side of caution when using it.
Actual numbers
For the year ending 31 March 2026 (FY26), the telecoms group’s expected to report adjusted EBITDAaL of €11.3bn-€11.6bn. At current (3 October) exchange rates, the lower end of this range is £9.8bn.
Vodafone’s current market-cap is £20.4bn. It therefore trades on 2.1 times earnings. But if it was valued in line with Equidam’s figure of 9.5, its share price would be 4.5 times higher.
Of course, the trouble with industry averages is that they don’t reflect the individual circumstances of a particular company. And every business is different. Indeed, Vodafone faces a number of specific challenges.
Most notably, the group’s struggling in Germany (its biggest market) where a change in law has restricted the bundling of TV contracts in apartment blocks.
And its return on capital employed was the same in FY25 as it was in FY24. This is disappointing given that the group’s been downsizing recently with the specific objective of trying to use its capital more efficiently. However, one of the benefits of selling off some of its divisions — including Spain and Italy — has been a reduction in its net debt position.
Another comparison
But rather than consider how Vodafone compares to industry averages, let’s measure it against Europe’s largest in the sector, Deutsche Telekom. The German giant’s currently trading at 3.3 times its expected EBITDAaL for 2025. If Vodafone could achieve a similar valuation, its share price would be 58% higher.
And I think the group could close the gap. Compared to the same period in 2024, its first quarter results showed Türkiye and Africa growing strongly. Overall, it reported 4.9% earnings growth.
Also, at 31 March, its net debt to adjusted EBITDAaL ratio was 2. Perhaps, surprisingly, this compares favourably to Deutsche Telekom’s figure of 3.2 at 31 December 2024. The British group’s large debt burden has often been flagged as a concern.
Along with its strong brand and attractive valuation, I think these are solid reasons why Vodafone could be a stock for long-term investors to consider.
