WES share price in focus
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.
WTC shares
Founded in 1994 by Richard White and Maree Isaacs, Wisetech Global is a developer of cloud-based software used for international and domestic logistics industries.
Wisetech’s vast suite of software products is used across various logistics functions including fowarding & customs, landside transport, rates & contracts, warehousing, and transport management systems.
Their cornerstone software is called Cargowise. It’s become an industry-leading solution now used by all 25 of the largest global freight forwarders and 46 of the top 50 third-party logistics providers.
WES share price valuation
We would consider WES 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, Wesfarmers Ltd reported a debt/equity ratio of 131.4%, 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, WES has delivered an average dividend yield of 3.4% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, WES reported an ROE of 30.3%. For a mature business you generally want to see an ROE of more than 10%, so WES clears this hurdle.
As a growth company, some of the trends we might consider from WTC 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, WTC has increased revenue at a rate of 27.1% per year to hit $1,042m in FY24. Meanwhile, net profit has increased from $108m to $263m. WTC’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 WES or WTC shares. To learn more about valuation, check out one of our free online investing courses.
