Is the Woolworths Group Ltd (ASX:WOW) share price a buy?

The Woolworths Group Ltd (ASX: WOW) share price has fallen 9% over the past three months. It has become better value, but is it a buy?

Woolworths Group operates supermarkets, Dan Murphy & other liquor stores, Big W, hotels and its petrol business.

Management are actively looking to execute an IPO or sale of the Petrol business, which could unlock a nice amount of capital for the business.

Woolworths is no longer that rock-solid business that boasts of a growing profit and dividend every year single year. Competition from Aldi and Costco, as well as Woolworths management letting things slip, has made things a lot tougher.

The adventure into home improvement with the failed Masters business was a huge mess-up.

However, CEO Brad Banducci has focused on the right things at the supermarket to turn things around. Prices have been reduced to a more reasonable level, store-brand quality has been improved and service has been increased. There’s no point trying to compete with Aldi on price.

I was quite impressed with the Woolworths FY18 result. Continuing operations sales grew by 3.4%, continuing earnings before interest and tax (EBIT) grew by 9.5% and earnings per share (EPS) grew by 11.4%.

Is it a buy?

I must admit I had completely written off growth for Woolworths a couple of years ago, so this recovery surprised me.

However, it’s trading at more than 22x FY18’s earnings. I don’t think this is a good price to buy a business that is likely to grow at single digits for the foreseeable future.

I’d also suggest Wesfarmers Ltd (ASX: WES) and Metcash Limited (ASX: MTS) are unlikely to grow at double digits any time soon. I’d much rather buy growth shares at attractive prices like Citadel Group Ltd (ASX: CGL).

Another exciting growth share to consider is this tech share which doubled its profit last year.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of Citadel Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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