Should you buy Woolworths shares today?

Woolworths shares are dipping today. Should you buy in?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Woolworths (ASX: WOW) shares are dipping some 2% today – against a slight rise in the S&P/ASX 200 index (Index: ^AXJO) (ASX: XJO) — as the retailer has issued a profit update. What does the news mean for investors, and should you buy shares today?

"Substantial opportunity for growth"

The company announced it has made positive progress in its Masters chain of home improvement stores, a joint venture with Lowe's. According to the release, the home improvement market remains compelling and a likely source of growth, with Woolworths citing the market's overall sales value of $42 billion in 2012 and fractured nature, the largest player having just 16% market share – likely Bunnings, owned by Wesfarmers (ASX: WES).

Sales for Woolworths' overall home improvement division climbed nearly 50% over last year, with Danks posting 4% growth and Masters posting growth of 262% (on a 53 week basis). There are 15 Masters stores now open for 12 months or more, and Woolworths reports these stores are meeting their business sales targets and customer response has been "very pleasing." Though currently operating at a loss, the company expects the Masters chain to break even in financial year 2016.

Raised profit guidance

Overall, Woolworths now expects net profits after tax to grow in the 5% to 6% range, up from previous growth estimates in the 4% to 6% range. It's a relatively good result, but investors will want to balance the news against the current valuation of Woolworths shares, which still look a bit richly priced at about 19 times trailing earnings. In other words, keep this powerful Australian retailer on your watch list and wait for a further pullback.

Looking for an actionable investment idea right now? Discover The Motley Fool's favourite dividend paying stock for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool contributor Catherine Baab-Muguira does not own shares in any company mentioned in this article.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »