Deciding which FTSE 100 stocks to buy can be difficult. Many of them are household names and are major players in their individual markets. Generally speaking, their balance sheet strength means they are less likely to deliver earnings surprises. This should help ensure greater share price stability. And a lot of them pay generous dividends, which makes them attractive to income investors. Is this FTSE 100 stock a no-brainer buy, With a 10.4% yield, P/E ratio of 9.9, and a P/B of 0.37?

To sort the best from the rest — and to identify which offer the best value for money — many investors employ popular valuation techniques. I’ve been applying some of these to Vodafone to see if the stock’s worth buying for my portfolio. I have different valuation techniques I use beside the usual ones, which of course include, market cap, debt to equity, management, 3 consecutive reports etc.

Let's Crunch the numbers

With the words of Mark Twain ringing in my ears, it’s important to remember there are lies, damned lies, and statistics.

The 10.4% dividend yield for Vodafone — the highest on the FTSE 100 — is based on its payouts over the past 12 months. In March, the company announced a 50% cut. It’s therefore presently (29 November) yielding a more modest 5.2%. However, this is comfortably above the average for the index of 3.8%. Of course, dividends are never guaranteed.

In contrast, it’s fair to say that Vodafone’s price-to-book (P/B) ratio of 0.37 is the lowest (excluding those that have net liabilities) of all FTSE 100 members. At 30 September 2024, its balance sheet was disclosing equity (assets less liabilities) of €60.6bn (£50.4bn). With a current stock market valuation of £18.5bn, if the company ceased trading today — and it sold all of its assets and cleared its liabilities — there’d be £31.9bn of cash left over to return to shareholders. That’s a 172% premium to its current share price.

Looking at earnings, the stock has a price-to-earnings (P/E) ratio of 9.9, comfortably below the index average of around 14.5. But whether this is a good indication of value for money is relative. Different sectors attract different earnings multiples and these can fluctuate over time as industries fall in and out of favour. However, it’s lower than BT’s, its nearest rival in the FTSE 100. And it’s comfortably below the average of 202 European telecoms stocks (14.1).

So should you buy?

My verdict

I’m already a shareholder but, of course, this doesn’t mean I can’t include more of the stock in my ISA. Indeed, given that I’m sitting on a paper loss, it’d help reduce my average cost price. And hopefully, I’d break even quicker.

But I don’t want to buy any more, even though — on paper at least — the stock appears to be something of a bargain.

Although I think the company’s current turnaround plan will deliver results, it looks as though it’s going to take a while. Revenue in Germany — the telecoms giant’s largest market — is still falling. And it’s still unclear how the company’s merger with Three (which now looks likely to be given regulatory approval) is going to impact on the group’s financial performance. Its relatively high borrowings are also a cause for concern.

For these reasons, I think there are better opportunities for my investment cash elsewhere.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now. While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. The market believes 5 companies in particular are poised for spectacular profits.

SSE plc (LSE: SSE)

Why for the Future of Energy?

• A leader in renewable energy, particularly offshore wind projects like Dogger Bank, the largest wind farm under construction.
• Aggressive investment in green hydrogen and carbon capture technologies aligns with the UK’s net-zero goals.
• Long-term government contracts provide financial stability.
  SSE’s focus on large-scale renewable energy projects ensures it remains a key player in the UK’s energy transformation.

Octopus Renewables Infrastructure Trust (LSE: ORIT)

• A diversified portfolio of renewable assets, including wind, solar, and battery storage across Europe and the UK.
• Provides investors exposure to the growing demand for clean energy infrastructure.
• Managed by Octopus Energy, known for its innovation in green technology and customer-centric solutions.
  ORIT’s focus on a mix of renewable energy sources and battery storage gives it a balanced and forward-looking energy strategy.

National Grid plc (LSE: NG)

• Responsible for critical energy infrastructure, including interconnectors importing renewable energy.
• Investments in smart grid technology to support the UK’s decarbonization efforts.
• Expanding its renewable energy capacity through projects like offshore wind connectivity.
  National Grid’s monopoly on energy distribution ensures stability while it transitions to greener technologies.

ITM Power (LSE: ITM)

• A pioneer in hydrogen energy solutions, developing electrolysis systems to produce green hydrogen.
• Positioned to benefit from the UK government’s focus on hydrogen as a key element in the net-zero strategy.
• Partnering with energy giants to scale production and commercial use of hydrogen.
  ITM Power’s leadership in green hydrogen technology makes it a cornerstone of the UK’s future energy infrastructure.

Ceres Power Holdings (LSE: CWR)

• Specializes in solid oxide fuel cells (SOFCs), providing efficient energy solutions for both power generation and transport.
• Partners with global energy companies, offering licensing opportunities for scalable growth.
• Focuses on low-emission technology that integrates well with renewable energy sources.
  Ceres Power’s proprietary fuel cell technology makes it a strong player in the transition to cleaner energy systems.

These companies and trusts are at the forefront of the UK’s energy transformation. Their strategic investments in renewables, hydrogen, and energy-efficient technologies align with future energy trends, making them attractive options for long-term growth and sustainability-focused portfolios. Give that UK is has the highest cost of energy in the western hemisphere including China, it has to come up with innovation ways to reduce energy cost to citizens.