The Woolworths Limited (ASX: WOW) share price has been on a tear, but I think the TPG Telecom Ltd (ASX: TPM) share price offers better value today.
Woolworths
Woolworths is one of Australia's leading supermarket chains. It also owns Big W, Dan Murphy's, BWS, Cellarmasters, and ALH Group, which is a pubs and hotels business.
By far, the biggest contributor to Woolworths' profit is the supermarkets business, which contributes around 74% of sales and profit. This includes its operations in Australia and New Zealand.
Together with its failed Masters business, in recent years, strong competition from Wesfarmers Ltd's (ASX: WES) Coles and Aldi have hurt the Woolworths share price. Despite a rally to $26 from below $21 in mid-2016, Woolworths' shares changed hands at around $37 just three years ago.
Looking ahead, the company is navigating its way through a turnaround, trying to reinvigorate its brand and appeal with consumers. However, there is still a way to go, in my opinion.
An alternative
At today's prices, I am more inclined to add a company like TPG Telecom Ltd to my watch list.
TPG is the name behind the growing telecommunications company. Its shares recently suffered a sell-off but unlike Woolworths' fall, TPG's appears to be nothing more than the market coming to its senses.
Last year, the company was priced as if its recent growth could continue forever. However, after a near 50% fall in just six months, the share price is more reflective of its likely future, which could include slower profit growth.
Indeed, despite the realisation that TPG cannot grow to the stars, I think the valuation of its shares has improved enough to make it a must-have on watch lists. Its shares also offer a handy 2.4% fully franked dividend yield.
Foolish Takeaway
At today's prices, TPG shares appear better value than Woolworths, in my opinion. Although it has a lower dividend yield (2.4% versus 3%), TPG shares offer more growth at a better valuation.
