Coles and Woolworths are the two largest supermarket retail stores within Australia. They both own stores throughout many towns and cities in Australia and are well known to the Australian people. Today we will take a look at both their fundamental financial information and compare the two.
Woolworths was founded in late 1924 and Coles was founded in early 1914. In July 1993 Woolworths first listed on the ASX at a price of $2.45 per share. November 2018 Coles was split from parent owner Wesfarmers and was listed on the ASX with ticker code COL at a price of $12.49 per share.
Let’s take a look at the information provided to us by the companies to take a look at their financials.
As you can see the market cap of Woolworths is almost double of that of Coles. What is more important is the EBIT/Revenue ratio. You can see that Woolworths has a better conversion rate which is to be expected with a larger company. Taking a look at the gross margins, Woolies beats Coles again, but, in saying that, Woolies Cost of Doing Business (CODB) is much larger than Coles which makes Coles a little more attractive. Both seem to be making money in the last financial year but does making money come at a cost of the share price?
Now while Woolies looks a little better on the financial side of things, lets take a look at the valuation given to Woolworths compared to its little brother, Coles.
Currently Woolworths share price sits on a PE of 28.47 which in my opinion is quite expensive for a conservative company. With the demerger from Endeavor Group (BWS, Dan Murphys and Hotels) I think this will also hurt the share price. The current dividend yield puts it at 3.17% while Coles is more attractive. Both these shares seem a little expensive to me but I personally would be leaning towards Coles under 20 PE.
Taking a look at the Woolworths graph, we can see there is a support line of roughly $34.22. This line has been tested a couple times but seems to bounce back. Woolworths MACD also shows a Strong Bearish signal showing that the price is like to fall from current prices. As I am writing this the price of WOW shares have declined under the support line while there is a strong bearish signal. There will have to be a reversal in the MACD line before another support line can be established.
Coles shares have a support line of approximately $15.33 which hasn’t really been tested too much as the share price has increased slowly over time but is now looking like decreasing. The MACD for Coles shows a medium Bearish signal which will most likely result in some decrease in price for the short term.
Disclaimer
The information in this article is for general purposes only and should not be considered as advice to any persons. No monies should be invested based on what is contained in this article. I own neither Coles (ASX:COL) or Woolworths (ASX:WOW) directly, I do hold them via ETF’s and LIC’s.
