WES and DOW shares: why you should take notice

The Wesfarmers Ltd (ASX:WES) share price is up 0.9% since the start of 2025. It's probably worth asking, 'is the WES share price good value?'
The Wesfarmers Ltd (ASX:WES) share price is up 0.9% since the start of 2025. Meanwhile, the Downer EDI Ltd (ASX:DOW) share price is 9.1% away from its 52-week high.

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.

DOW shares

Downer is the leading provider of integrated infrastructure services in Australia and New Zealand. They’re responsible for building, maintaining, and operating transit systems, utilities services, and public infrastructure.

While the name might not be familiar, you’ve definitely come across their work. Downer operate services like the Yarra Trams in Melbourne, and build the passenger trains you see in most states.

Downer separates its business into three main segments of Transport, Utilities, and Facilities. Transport delivers a little over 50% of their revenue, and Utilities and Facilities around 20% and 30% respectively.

WES & DOW 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 for Downer EDI Ltd, they reported a debt/equity ratio of 81.1% in FY24, meaning the company has more equity than debt.

Since 2019 DOW has achieved an average dividend yield of 3.7% per year, and in FY24 reported an ROE of 3.6%

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.

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