Is the Wesfarmers share price a buy today?

Is the Wesfarmers Ltd (ASX:WES) share price a buy today?

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Is the Wesfarmers Ltd (ASX: WES) share price worth buying today?

The Wesfarmers share price is close to its all-time high after the divestment of Coles Group Limited (ASX: COL), although it still holds a sizeable portion of it. The Wesfarmers share price has gone up 22% since the start of the year.

There are many catalysts that have helped turn Wesfarmers around. One of the main changes has been the Reserve Bank of Australia (RBA) reducing the Australian interest rate by 0.5% to just 1%. Not only might this have a positive effect on consumer spending but it has boosted the asset prices of many Australian shares with investors looking for growth and yield.

Wesfarmers is one of the most popular shares for dividends because it provides different exposure compared to big banks like Commonwealth Bank of Australia (ASX: CBA) & Westpac Banking Corp (ASX: WBC) and it's not going through huge change like Telstra Corporation Ltd (ASX: TLS) with the NBN.

But it's not as though Wesfarmers is risk-free. Online shopping has completely changed the retail landscape in North America and Europe. Amazon, eBay and others want to take a slice of Wesfarmers' earnings. With Kmart, Target, Officeworks and Bunnings, it has a huge store network that needs to be ready to face the online retailers.

But Wesfarmers is doing things to modernise its offering. It recently acquired Catch Group, owner of Catch.com.au, for $230 million which diversifies Wesfarmers' earnings, can provide economies of scale and will help boost Kmart Group's e-commerce capabilities. Online sales growth is needed because in a recent trading update Kmart Group is suffering from falling comparable sale declines and is likely to report a fall in earnings before interest and tax (EBIT) in the FY19 result.

Wesfarmers is also planning to launch e-commerce for Bunnings nationwide by the end of the year.

What I'm very interested in is that Wesfarmers is trying to diversify away from retail entirely, with a failed bid for Lynas Corporation Ltd (ASX: LYC) and a seemingly successful bid for lithium business Kidman Resources Ltd (ASX: KDR).

Foolish takeaway

Wesfarmers is trading at 22x FY20's estimated earnings with a projected FY20 grossed-up dividend yield of 5.4%. I'm pleased with the steps Wesfarmers is taking, but I don't think it looks good value to buy today.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Wesfarmers Limited. 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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