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Is the Vocus Group Ltd share price in bargain territory?

The Vocus Group Ltd (ASX: VOC) share price might be decent value at $3.60.

Vocus Share Price

XJO versus VOC

Source: Google Finance

Who is Vocus?

Vocus is the owner of Dodo, Primus, Eftel, Slingshot, Orcon and other telecommunications and utility brands. As can be seen in the chart above, the past 12 months have been tough for Vocus shareholders, who watched on as the company’s share price plummeted nearly 60%.

Compared to the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), the returns are even more stark, with Vocus underperforming to the tune of 70%. Ouch.

But it can also be seen that Vocus isn’t the only telecommunications company being afflicted by the recent selloff. TPG Telecom Ltd (ASX: TPM) shares, another telco, have suffered the market’s wrath.

Are shares cheap?

Vocus is still digesting the recent acquisitions of NextGen, Amcom and M2 Group, three established telecommunications businesses it acquired in quick succession.

Together with a general malaise sweeping across the telecommunications industry, investors have also grown fearful of the risks presented by the National Broadband Network, which will level the playing field for internet providers.

This negative sentiment continued until earlier this month when private equity firm KKR tried to snatch Vocus shares at a bargain of $3.50 per share. KKR’s takeover offer is highly conditional and in my opinion, deeply undervalues the business. The offer, which is still on the table, would have been a bargain.

Are Vocus shares a bargain?

Even at today’s prices of $3.60, Vocus shares look cheap, albeit it a higher risk investment idea. I don’t know if I would call it a ‘bargain’, but I think long-term investors could do worse than run the ruler over it today.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia owns shares of TPG Telecom Limited and Vocus Communications Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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