Are Vocus Group Ltd shares worth a punt?

The Vocus Group Ltd (ASX: VOC) share price is up 20% in the past five days, is it time to take a punt?

Vocus share price

VOC share price

Source: Google Finance

As can be seen above, it has been a rollercoaster ride for Vocus shares. However, the telecommunications company has had its share price revived to the tune of 20% over the past five trading days.

Are investors seeing an end to the selloff?

Or is it short sellers covering their tracks?

Who is Vocus?

Vocus is a leading telecommunications provider, with names like Dodo, iPrimus, Eftel, Slingshot and much more under its banner. And that’s just on its consumer side. It also owns M2 Wholesale, Amcom, Vocus, and many more brands in New Zealand. It also has an extensive fibre network.

As it raced towards $10 per share last year investors were in awe of the company’s ‘roll up’ strategy, whereby it sought to take over competitors one by one. That was until it got to Amcom, M2 Group and NextGen Networks, all of which were Vocus’ most ambitious takeovers — and in rapid succession. Vocus was in a race with TPG Telecom Ltd (ASX: TPM) to consolidate the industry ahead of the NBN’s full rollout.

However, with so many acquisitions in such a short period of time, it was only a matter of time before the cockroaches crawled out from underneath the acquisitions. Integrating two businesses is tough work, let alone four companies in fewer years. Former management attempted to shake up the boardroom and take back control, but they were shown the door.

Together with a profit downgrade and a shift in investor sentiment Vocus shares are now plumbing multi-year lows.

Is it time to take a punt?

It can be easy to cut your losses when a company does what Vocus has done. However, there is a chance that Vocus shares are now better valued than they have ever been.

It’s worth noting that Vocus still has some work to do before it rights its ship, has bucket loads of debt and is facing competition from other companies on the NBN. However, there are positives, too. For example, it has some good assets and a large market presence, with the ability to cross-sell services and products.

Foolish Takeaway

Following the recent profit downgrade, further losses might reasonably be expected from Vocus, along with an impairment and maybe a dividend cut. It is a high-risk prospect.

However, if you are prepared to stomach heightened levels of volatility, Vocus shares might look cheap in a few years from now.

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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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