COL share price in focus
Coles is a leading Australian retailer providing everyday essentials including fresh food, groceries, general merchandise, liquor, fuel and financial services. It was founded in 1914 in Victoria and still calls Melbourne its home base.
Coles was formerly owned by the listed giant Wesfarmers from 2007 until 2018, when it was spun-off and listed as its own entity on the ASX under the ticker symbol ‘COL’. Coles’ earnings are unsurprisingly dominated by the supermarket side of the business, however, it partly or fully owns and operates adjacent businesses like flybuys, Liquorland, First Choice, Vintage Cellars, Coles Express and more.
While Coles is second to Woolworths in the supermarket sector, it still controls a significant share of the Australian grocery market (about 28%). Since its listing in 2018, Coles has established itself as a fairly reliable dividend payer for investors seeking income.
ALL shares
Aristocrat Leisure is an Australian gambling machine operator headquartered in Sydney. It was founded by Len Ainsworth in 1953
Today, Aristocrat is the largest gambling machine manufacturer in Australia and one of the largest manufacturers of slot machines in the world. However, the business has diversified over the years and now also makes online mobile games. This segment has grown steadily to now make up nearly half of the company’s revenue.
The gaming machines Aristocrat make can be sold outright to a venue or gaming operator. Alternatively, a machine can be installed with a proportion of the revenue generated being paid on a recurring basis back to Aristocrat.
COL & ALL share price valuation
One way to have a ‘fast read’ of where the COL share price is could be to study something like dividend yield over time. This can give us a sense of the stability of the company and whether they can consistently pay out a percentage of profits.
Remember, the dividend yield is basically the ‘cash flow’ to a shareholder, but it can fluctuate year-to-year or between payments. Currently, Coles Group Ltd shares have a dividend yield of around 3.40%, compared to its 5-year average of 3.76%. In other words, COL shares are trading lower than their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends have fallen, or that the share price is increasing, or both. In the case of COL, the annual report shows last year’s dividend was greater than the 3-year average, so the dividend has been growing.
Since ALL is more of a ‘growth’ company than an established blue chip, a price-sales ratio might be a more appropriate assessment. This ratio gives us an idea of how the company has historically been valued relative to its earnings, which can indicate if the company is over or undervalued today. The ALL share price currently trades at a price-sales ratio of 6.85x, which compares to its 5-year long-term average of 5.64x. So, its shares are trading above their historical average. Don’t forget, a simple multiple like this should only be the start of your research. The Rask websites offer free online investing courses, created by analysts explaining things like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s a good idea to use multiple valuation methods to value a share like Aristocrat Leisure Ltd.
