A bruising few years has pushed the Vodafone (LSE: VOD) share price to levels previously seen only in the last century. The shares now change hands for 72p, a price that sounds more like a bargain penny stock than one of Europe’s largest companies. 

Comparing it to previous highs of 294p in 2014, 237p in 2018, 128p in 2022 or even that dotcom-fuelled all-time high of 548p some years ago throws up an obvious question. Just how cheap is the price? 

Patchy record

Before I try to unravel an answer to that question, I’ll point out that I’m approaching this with a degree of caution. As the famous saying goes, a stock that has fallen 90% is one that fell 80% and then fell by half again. I’ll need more than a big-sounding discount to make me consider the shares worth buying. So with that in mind, what do we have here?

The big recent news centres around a dividend that has been slashed. The firm was hamstrung trying to keep up with payments it couldn’t really afford. A yield that had sneaked above 10% looked quite unsustainable so I view the decision as a good one. However income seekers might be put off with a near 5% yield from a company that has a patchy record of growing its value. 

Speaking of growth, analysts are expecting significant earnings growth in the coming years. The consensus EPS (earnings-per-share) between 2024 and 2027 is a rise of 57%. If they’re somewhere near the mark then today’s share price gives a hypothetical price-to-earnings ratio of just 6.6. That’s undeniably cheap and more in line with dinosaur stocks like oil and tobacco rather than a company at the beating heart of modern technology. 

Screen time

As with many tech stocks, telcos have plenty of growth opportunities on offer particularly in less established markets like Africa where Vodafone does have a presence. Sadly, this is more than offset by the firm’s biggest markets like the UK and Germany having reached saturation point. Most folks are already paying for all the data they need. Many others are actively trying to use less in an effort to not succumb to the negative effects of too much screen time. 

Another issue is a low return on capital employed. Basically, Vodafone is investing in infrastructure and not seeing too much in the way of returns. Combined with the other problems, this does make the share price seem not as cheap as it first appears. 

One promising way out of these issues is the proposed merger with Three. While not given the rubber stamp just yet, the move would put the new company at number one in the UK mobile market and possibly deliver a raft of operational efficiencies. Is that enough for me to call the Vodafone share price cheap? Probably not. The stock isn’t a buy for me at present.