Is the Woolworths share price?

Is the Woolworths Group Ltd (ASX:WOW) share price a buy?

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Is the Woolworths Group Ltd (ASX: WOW) share price a buy at the current price?

Woolworths has been a solid performer over the past year, the share price alone is up 14% plus the returns of capital. Over the past six months the share price is up around 10%.

Despite the extremely competitive environment that Woolworths is operating in, it managed to nudge earnings higher in the recent half-year result.

Sales from continuing operations were up 2.3%, continuing earnings before interest and tax (EBIT) were 1% higher and continuing net profit after tax (NPAT) grew 2.1%. There was a mix of results within that – Endeavour Drinks, which includes Dan Muphy's, saw EBIT drop 6.4% but the Australian Food division managed to grew EBIT by 4%.

The Woolworths supermarket business had to reduce its prices by an average of 2.5% excluding tobacco. Aldi, Costco, Amazon and Coles Group Limited (ASX: COL) all are trying to attract customers with lower prices, so this trend isn't going to change any time soon.

Woolworths, under the stewardship of CEO of Brad Banducci, has done a good job on focusing on delivering the right outcomes for both customers and shareholders. Closing and selling non-core divisions like Masters has been the right choice in hindsight, customers think of Woolworths as a good-service business again and dividends & buybacks are useful for shareholders.

Woolworths has started increasing its dividend again after a big cut in 2016. This is exactly what long-term shareholders like to see.

Foolish takeaway

Woolworths is trading at 22x FY20's estimated earnings. This isn't hugely expensive, but it's nearly trading at a multi-year high due to the announcement of the buy-back. I don't think now is the right time to buy shares. Mid-2016 may have been the best time to buy, but profit margins may continue to come under pressure from competition, so I'd rather sell than buy today.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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