Since hitting the ASX boards in November the Coles Group Ltd (ASX: COL) share price has had a number of ups and downs and currently finds itself closer to its 52-week low than its 52-week high.
Is this a buying opportunity for investors?
It certainly could be based on the broker notes that I've seen in recent weeks.
Although equity analysts at both Macquarie Group Ltd (ASX: MQG) and Morgan Stanley currently have the equivalent of hold ratings on the supermarket giant's shares, both have price targets meaningfully higher than its current share price.
A recent note out of the Macquarie equities desk has a neutral rating and $13.48 price target on Coles shares. This price target implies potential upside of 14.5% for its shares over the next 12 months excluding dividend.
While the broker believes that the Woolworths Group Ltd (ASX: WOW) share price deserves to trade at a premium to Coles, it thinks the gap is too wide at present and that Coles' shares deserve to rerate higher.
Elsewhere, analysts at Morgan Stanley recently initiated coverage on Coles with an equal-weight rating and $13.00 price target. This price target implies potential upside of over 10% excluding dividends.
Should you invest?
Based on Macquarie's forecast of earnings per share of 77.3 cents and a dividend of 65.7 cents per share in FY 2019, Coles shares are currently trading at 15x estimated forward earnings and offer a 5.6% fully franked forward yield.
I think this makes Coles shares good value and a quality option for those in search of defensive shares and income options.
In addition to Coles, I think it could be worth considering its former parent Wesfarmers Ltd (ASX: WES) right now. Wesfarmers' shares are also trading at 15x estimated forward earnings and offer an estimated fully franked forward 6% yield.
