JHX share price in focus
James Hardie Industries is a building solutions company and the world’s largest producer of fibre cement and gypsum products.
The company operates across North America, Europe, Australia, and New Zealand with a team of more than 5,200 employees.
The main selling point of fibre cement for buildings is that the product doesn’t burn, is resistant to water and termite damage, and is durable and requires low maintenance.
WES shares
Founded in 1914, Wesfarmers is a diversified Australian conglomerate headquartered in Perth. Its operations span retail, chemical, fertiliser, industrial and safety brands and products across Australia and New Zealand.
Wesfarmers is often compared to a publicly listed private equity firm. It has a long history of buying businesses, leveraging their cash flow, re-investing in growth and eventually selling them for a premium. A notable example of this is Coles Group, which it bought in 2007 and spun out in 2018. However, by far (over 50%) of the company’s operating profit comes from Bunnings, the #1 hardware and home improvement business in Australia. Wesfarmers began buying parcels in Bunnings in 1987, eventually acquiring the final 52% in 1994 for $594 million.
Wesfarmers has long been considered a leading blue chip stock on the ASX and is known for paying a consistent dividend. Other well-known brands under the Wesfarmers umbrella include Blackwoods, Kmart, Target, Officeworks, and Priceline Pharmacy.
JHX share price valuation
As a growth company, one way to put a broad estimate on the JHX share price could be to compare its price-to-sales multiple over time. This can tell us how the company has historically been valued relative to its total revenue.
Currently, James Hardie Industries plc shares have a price-sales ratio of 2.38x, compared to its 5-year average of 4.14x, meaning its shares are trading lower than their historical average. This could mean that the share price has fallen, or sales have increased, or both. In the case of JHX, revenue has been growing over the last 3 years. Of course, context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric, but this can be a rough starting point.
Since it is a more of a ‘blue chip’ company, we could look at the dividend yield of WES to determine its value. If we compare it to the historical dividend yield, we can get a sense of the stability of the company and its ability to pay out income. WES is offering a trailing dividend yield of around 2.67%, which compares to its 5-year average of 3.36%. Of course, this is just one of many ways you could put a value on WES shares. The Rask websites offer free online investing courses, created by analysts explaining valuation methods like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s important to look at multiple methods when you’re trying to value the WES share price.
