On a day where Australian equities are generally trading lower, Woolworths Limited (ASX: WOW) is one of the market's few shining lights with its shares having risen 2% to a new April high of $29.80.
Investors have been bearish on the supermarket behemoth over the last 12 months, selling the stock down significantly in that time.
While there has been plenty of concern about the amount of capital being pumped into its loss-making Masters Home Improvement chain, market pundits are becoming increasingly concerned about lower food inflation, together with its ability to continue competing with the likes of Aldi, Costco, and the owner of Coles, Wesfarmers Ltd (ASX: WES).
Tensions are also high ahead of the retailer's Investor Strategy Day, which is being held on 6 May in Sydney. The company is expected to provide an update on its struggling Big W and Masters divisions, while it is also expected to provide greater detail on its supermarket upgrade.
The out-take from this meeting could ultimately determine whether the shares begin to recover, or if they continue to fall to new multi-year lows.
Should you buy Woolworths?
Woolworths' most recent earnings update was not well received by the market. In fact, many analysts swung their axes on their target share prices, with Morgan Stanley even predicting they will fall to just $24.00. JPMorgan and Citi are bearish too, with forecasts of $28.27 and $28.10, respectively.
Indeed, the immediate future remains unclear for Woolworths and the shares could certainly suffer if the company warns of further earnings weakness. In saying that however, Woolworths' shares are trading within a very attractive valuation range with the stock sitting near a two-year low level.
While short-term investors appear to be focusing on the small picture, long-term investors should recognise the opportunity to buy a high-quality company at an excellent price, whilst also taking advantage of its 4.7% fully franked dividend in an otherwise low interest rate environment.
