WOW share price in focus
Founded in 1924, Woolworths is the leading supermarket operator in Australia and New Zealand with over 3,000 stores and over 100,000 employees. In terms of revenue and market share, it’s also one of Australia’s largest companies across any sector.
Besides the supermarket we all know (but don’t exactly love, according to consumer trust rankings), Woolworths Group also operates discount department stores under the Big W brand, as well as business-to-business (B2B) brands like PFD, which is a foodservice distributor. However, the 35%+ market share of Australian groceries is undoubtedly its crown jewel and leading revenue driver.
Woolworths has historically been a popular choice for ASX investors seeking dividend income due to its fully franked dividends, usually at a yield of over 3%. It also offers a ‘defensive’ earnings stream with most of its revenue coming from consumer staples. That means in an economic downturn, Woolworths might be less likely than other companies to see revenue decline significantly.
ALL shares
Founded by Len Ainsworth in 1953, Aristocrat Leisure is an Australian gambling machine operator that is headquartered in Sydney.
Currently, Aristocrat is the largest manufacturer of gambling machines in Australia and one of the world’s leading producers of slot machines. However, the company’s business extends beyond just physical machines; Aristocrat also develops online games, which have grown to contribute nearly half of its total revenue.
Aristocrat’s gaming machines can either be sold outright to venues or gaming operators or installed with a revenue-sharing model, where a portion of the earnings generated is paid back to Aristocrat on a recurring basis.
WOW & ALL share price valuation
One way to have a ‘quick read’ of where the WOW 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, Woolworths Group Ltd shares have a dividend yield of around 4.68%, compared to its 5-year average of 2.92%. In other words, WOW shares are trading higher than their historical average dividend yield. Be careful how you interpret this information though – it could mean that dividends are growing, or it could mean the share price is falling, or both. In the case of WOW, 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 5.60x, which compares to its 5-year long-term average of 5.64x. So, ALL shares are trading lower than 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.
