Why the Woolworths share price rose 6% in November

Here's why the Woolworths Group Ltd (ASX: WOW) share price rose 6.5% in November

| 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

The Woolworths Group Ltd (ASX: WOW) share price has had another solid month of gains to report to shareholders. WOW shares started November off at $37.32 but by the time December kicked off on the markets this week, Woolworths shares were up to $39.76 – a monthly gain of 6.54%.

Seeing as the S&P/ASX200 (INDEXASX: XJO) only banked a 3% rise for the same period, it's an unquestionably good result for our nation's biggest supermarket chain.

Woolworths shareholders have had an exceptionally rewarding run in recent years. Although WOW shares fell substantially between 2014 and 2016, since then the stock is up almost 100% (a gain of over 100% if dividends were included), going on today's levels.

Why did Woolworths raise the roof in November?

The strange thing is that Woolworths didn't have a great month from a PR point of view. Right off the bat, the company had to deal with a wage underpayments scandal, which made news across the country. But the fact that Woolworths had underpaid what is estimated to be close to $300 million for nearly 6,000 staff didn't seem to bother investors too much.

In other news, Woolworths did release its quarterly update just before the start of November, in which it reported a 7.1% increase in sales – helped along by its wildly successful Lion King toys promotional campaign.

Also assisting sentiment was an update that the Federal Court has given the green light for Woolworths' plans to legally restructure its Endeavour Drinks business. Woolworths plans to eventually spin off Endeavour in a move that's generally well-supported by shareholders.

It seems that the strong numbers coming out of Woolies and its Endeavour plans moving forward were enough to keep the company's positive momentum moving forward last month.

Are Woolworths shares a buy today?

Although I think there's a lot to like about Woolworths as a business, its price tag today is a touch too expensive in my opinion. The stock currently trades at a price-to-earnings multiple around 34, which I can't see being justified by Woolies' current growth rates. I would personally prefer to wait for a better buying opportunity with this one.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

More on Share Market News

Man sitting in a plane seat works on his laptop.
Opinions

Expert reveals 2 ASX stocks to sell — and 1 is a recent IPO

Toby Grimm from Baker Young shares his insights.

Read more »

Happy teen friends jumping in front of a wall.
Share Gainers

Guess which 4 ASX 200 shares are rocking new 52-week highs today!

Investors just sent these four ASX 200 shares to one-year-plus highs.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Broker Notes

Why are Platinum shares rocketing 13% today?

This fund manager is getting a lot of love from investors today. Let's find out why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why Evolution Mining, Orthocell, Platinum, and Turaco shares are charging higher

These shares are having a better day that most on Thursday.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why CSL, Imricor, Jumbo, and Netwealth shares are falling today

These shares are under pressure on Thursday. But why?

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Broker Notes

Morgans says these ASX stocks can rise 30% to ~50%

Let's see which shares could generate big returns for investors.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Broker Notes

Does Macquarie rate Fortescue shares a buy, hold or sell?

The broker has given its verdict on this popular mining stock.

Read more »

group of traders cheering at stock market
Share Market News

We could see the ASX 200 at 9,000 points by 2026. Here's why.

I wouldn't be shocked to see more records this year...

Read more »