With $36 billion in half-year sales, are Woolworths shares now undervalued?

Woolworths' half-year sales increased by 3.7% to $35.9 billion.

| More on:
A man looks a little perplexed as he holds his hand to his head as if thinking about something as he stands in the aisle of a supermarket.

Image source: Getty Images

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

sdf

Woolworths Group Ltd (ASX: WOW) shares are outperforming during the broader market sell-down today.

Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday trading for $30.07. In earlier trade on Tuesday, shares were up 0.8% at $30.30 apiece. At the time of writing, shares have slipped to $30.03 apiece, down 0.1%.

For some context, the ASX 200 is down 1.0% at this same time. The market is feeling the heat as US President Donald Trump forges ahead with 25% tariffs on exports from Mexico and Canada and an additional 10% tariff imposition on exports from China.

Taking a step back though, and as you can see in the chart below, Woolworths shares have underperformed the benchmark over the past full year, falling 8.0% compared to the 5.5% 12-month gain posted by the ASX 200.

Created with Highcharts 11.4.3Woolworths Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

With shares now down some 18% from the recent 28 August highs, and with the supermarket giant reporting $35.9 billion in sales for the half year (H1 FY 2025), is the stock now undervalued?

Are Woolworths shares a buy?

Commenting on Woolworths' half-year results, MPC Markets' Mark Gardner noted that (courtesy of The Bull):

Group net profit after tax of $739 million in the first half of fiscal year 2025 was down 20.6% on the prior corresponding period. The interim dividend of 39 cents was cut by 17%.

But it wasn't all bad news for Woolworths shares.

"Encouragingly, group sales of $35.9 billion grew by 3.7%," Gardner said.

He added that the early weeks of calendar year 2025 are also pointing to growth:

The company announced Australian food total sales growth of 3.3% in the first seven weeks of the second half of fiscal year 2025. It attributed the growth to a more stable trading environment following the recovery from industrial action in late 2024.

And, in answer to our headline question, Gardner concluded, "The shares appear undervalued, in my view."

But Gardner isn't ready to pull the trigger just yet, with a hold recommendation on Woolworths stock.

A more bullish take

Goldman Sachs counts among the brokers with a more bullish take on Woolworths shares.

Following on Woolies' half year results, Goldman said, "We reiterate Buy as we see early signs of a refocus on productivity and increased precision execution driving promotional effectiveness."

Goldman has a target price of $36.10 on Woolworths shares. That implies a potential upside of more than 20% from current levels, not including those upcoming dividends.

Motley Fool contributor Bernd Struben 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. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

A smiling man take a big bite out of a burrito
Consumer Staples & Discretionary Shares

Fundie says Guzman Y Gomez share price 'looks highly attractive'. Here's why

Blackwattle Investment says Guzman Y Gomez's current valuation and risk/reward profile looks very appealing.

Read more »

a bearded man with a big smile wearing a bright red apron holds a knife in one hand and a big slab of cheese in the other as though he is about to slice it.
Consumer Staples & Discretionary Shares

What's the upside for Bega shares according to Macquarie?

This broker sees room to grow for this Aussie consumer staples company. 

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Broker Notes

How much upside does Macquarie see for Collins Foods shares?

The company is scheduled to report on 24 June.

Read more »

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price.
Broker Notes

JP Morgan upgrades Domino's Pizza shares

Does the broker expect things to turn around?

Read more »

A block of cheese with grated cheese on top.
Consumer Staples & Discretionary Shares

Macquarie expects 20% upside for this ASX All Ords consumer staples stock

This week, Macquarie initiated coverage on Bega Cheese with an outperform rating.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Consumer Staples & Discretionary Shares

Why are Cettire shares crashing 27% today?

Things aren't looking good for this online luxury products retailer.

Read more »

Young lady in JB Hi-Fi electronics store checking out laptops for sale
Consumer Staples & Discretionary Shares

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Here’s what this broker has to say about these consumer discretionary companies. 

Read more »

Happy couple doing grocery shopping together.
Consumer Staples & Discretionary Shares

What does Macquarie think Woolworths and Coles shares are worth?

Should investors be interested in supermarket stocks?

Read more »