Should you buy Woolworths Limited today?

The upcoming results release appears to be a forgone conclusion for Woolworths Limited (ASX: WOW) shareholders.

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Woolworths Limited (ASX: WOW) is due to report its results on 29 August. With the share price currently flat over the past month, it would appear the market is comfortable with the company's ability to meet expectations for the full year result.

Is Woolworths fairly priced?

A recent article in The Australian Financial Review titled 'Woolworths' growth dilemma' strikes at the heart of the valuation conundrum that investors face.

As the article highlights, Woolworths, like its peer Wesfarmers Ltd (ASX: WES) "needs to expand and diversify." While this is arguably easier for Wesfarmers thanks to its conglomerate structure, it is no less important for Woolworths and so far its major move has been an attempt to crack into the hardware sector via the Masters Home Improvement brand.

On the face of it, the plan to compete with the Wesfarmers-owned Bunnings appears to make sense, however as the capital invested in the Masters business grows and the losses mount, many investors are querying the strategy.

What should investors do?

With Woolworths' management already updating the market on the (under) performance of Masters, the retailer has already 'shown its cards' to the market. On Friday, investors should largely receive pleasant news in the form of continuing best-in-class performance from the supermarket and liquor division.

At this stage it would make sense for investors to wait until they can review the results before buying, holding or selling the stock. Above all else, investors need to decide whether the hefty earnings multiple which the stock trades on is justified given their assessment of the retail giant's growth outlook.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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