WOW share price in focus
Founded in 1924, Woolworths is a leading retail operator in Australia and New Zealand, with over 3,000 stores and more than 100,000 employees. As one of Australia’s largest companies by revenue and market share, Woolworths plays a significant role in the region’s retail sector.
The company’s core operations include supermarkets (operating under the Woolworths brand in Australia and Countdown in New Zealand), discount department stores under the Big W brand, and business-to-business (B2B) services through brands like PFD. However, Woolworths’ dominant 35%+ market share in the Australian grocery sector remains its key strength.
Woolworths is also a popular choice among ASX investors looking for dividend income. It has a strong track record of paying fully franked dividends, typically offering yields over 3%, and its revenue base, largely derived from consumer staples, provides a stable and defensive earnings stream. The company’s competitive edge lies in its scale, enabling efficient distribution and cost control, as well as its proximity to consumers, as many shoppers continue to choose supermarkets based on convenience and location.
A2M shares
Founded in New Zealand in 2000, The a2 Milk Company sells dairy products which contain the naturally occurring A2 protein type. Most other dairy products on the market contain the A1 protein, which is claimed to be harder to digest for some people.
The company is responsible mainly for distribution and marketing, with the production outsourced to suppliers who source from over 25 certified dairy farms across Australia. A large part of the a2 business is infant formula, which is produced by its supply partner Synlait Milk in New Zealand.
While the science is a little uncertain on why a2 milk might be easier to digest, randomised studies have repeatedly shown that it is an effective solution for many people who struggle with ‘normal’ dairy products.
WOW share price valuation
We would consider WOW to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.
For FY24, Woolworths Group Ltd reported a debt/equity ratio of 300.2%, meaning the company is leveraged (it has more debt than equity). This can increase risk so it’s important that a leveraged company is generating stable returns and has sufficient cash flow to pay interest on its debts.
Over the last 5 years, WOW has delivered an average dividend yield of 2.9% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, WOW reported an ROE of 1.9%. For a mature business you generally want to see an ROE of more than 10%, so WOW’s returns are a bit less than what we’d expect.
As a growth company, some of the trends we might consider from A2M shares include revenue growth, profit growth, and return on equity (ROE). I say ‘trends’ because it’s always important to look at these figures over a few years. The trend is much more valuable info than a single measure at one point in time.
Over the last 3 years, A2M has increased revenue at a rate of 11.6% per year to hit $1,673m in FY24. Meanwhile, net profit has increased from $81m to $168m. A2M’s last reported ROE was 12.8%.
Please keep in mind that context is important – these metrics give us some indication of company performance, but it’s just the start of valuing WOW or A2M shares. To learn more about valuation, check out one of our free online investing courses.
