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.
FMG shares
Fortescue Ltd is an iron ore production and exploration company started by the well-known Australian polymath Andrew “Twiggy” Forrest. The company was founded in 2003 and has assets across the Pilbara region of Western Australia.
Fortescue’s main operation is iron ore production, shipping more than 190 million tonnes annually. However, Fortescue has also been ramping up exploration activities for materials like copper, rare earths, and lithium. This exploration covers countries including Australia, Argentina, Chile, Brazil, and Kazakhstan.
This is all part of Fortescue’s long-term strategy to take advantage of the shift to renewable energy. Demand for copper, lithium, and other rare earths are expected to skyrocket with increasing battery and electric vehicle production and Fortescue intends to fill that demand.
WOW & FMG 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.
Fortescue Ltd reported a debt/equity ratio of 27.6% in FY24, meaning the company has more equity than debt.
As for dividends, since 2019 FMG has achieved an average dividend yield of 10.5% per year, and in FY24 reported an ROE of 30.2%
Keep in mind that these are only a small selection of metrics. We don’t have enough information to value the business or make an investment decision. To learn more about valuation, check out one of our free online investing courses.
