Down 8% from all-time highs, are Wesfarmers shares an ASX bargain buy?

What do the experts say?

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Wesfarmers Ltd (ASX: WES) shares hit their highest closing price ever on August 28, finishing the day at $77.20 apiece.

The stock has since moved down 8% from its peak, swapping hands at $70.88 apiece at the time of writing.

Zooming out, shares in the conglomerate are up more than 24% this year to date, outpacing the broader market by a wide stretch.

But with Wesfarmers off its highs, the question is whether now is a good buying opportunity. Let's see what the experts think.

Can Wesfarmers shares keep growing?

Growth in share prices typically reflects business fundamentals. According to analysts, the company is poised to do more business over the coming years. As such, Wesfarmers shares could benefit.

One of Wesfarmers' key strengths is its diverse portfolio of businesses. The portfolio's crown jewels are Bunnings and Kmart, household names in Australia.

But its ownership in or of several other leading nationwide businesses means it has an endless stream of earnings – many of which aren't related to each other in any way, such as healthcare and retail. Priceline isn't competing with Bunnings for customers.

UBS forecasts Wesfarmers' revenues could grow by 4% in FY26, and net profit could grow 7-8% as well.

Meanwhile, Macquarie analysts forecast a 2.5% rise in Bunnings' sales in FY25, driven by growth in the current business portfolio.

This forecasted growth could provide a boost to the share price over time. But starting valuations matter for investment results.

Goldman Sachs is more cautious, rating Wesfarmers shares a hold with a price target of $68.

The broker has concerns about Wesfarmers' current price-to-earnings (P/E) ratio, which stands at 30 at the time of writing – down from 31 at the time of its August note to clients.

[W]e reduce our FY25/26/27e EBIT by 6%/5%/7% respectively given slightly lower sales growth and margins. We remain positive on the strong execution of Wesfarmers on continued market share gain and resilient margins. That said, the stock is trading at FY25e P/E of 31x, reiterate Neutral.

In light of Goldman's comments, the main risk appears to be a further decrease in the P/E multiple on Wesfarmers shares.

What about dividends?

My colleague Tristan laid out the case for Wesfarmers to deliver capital growth and dividends over the coming years. Hint: the future looks bright.

UBS forecasts that Wesfarmers' dividend per share could increase to $2.04 in FY25 and $2.73 by the end of FY29.

Meanwhile, according to CommSec, consensus projects dividends of $1.98 and $2.36 per share in the coming two years, respectively.

As such, UBS' forecasts are slightly ahead of consensus.

Foolish takeaway

Wesfarmers shares offer a mix of growth and income potential. However, broker opinions are split, mainly due to the stock's current P/E ratio.

Time will tell which side of the debate is right. Wesfarmers is up 33% in the past year.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group, Macquarie Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group and Wesfarmers. 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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