The Coles Group Ltd (ASX: COL) share price continued its strong run on Thursday and raced to its highest level since the Wesfarmers Ltd (ASX: WES) demerger.
The supermarket giant's shares rose 3% to finish the day at $14.66.
Is it too late to buy Coles shares?
Whilst its shares are certainly not the bargain buy they were around six months ago, I still see a lot of value in them for long term-focused investors.
Based on consensus estimates for FY 2020, Coles shares are currently changing hands at around 23x forward earnings and offer a fully franked forward 3.8% dividend yield.
As a comparison, the shares of rival Woolworths Group Ltd (ASX: WOW) are trading at 27x estimated forward earnings and offer a forward fully franked 2.8% dividend yield.
Given Coles' positive long-term outlook thanks to its refreshed strategy, I don't believe there should be such a wide valuation gap between the two companies.
That refreshed strategy aims to deliver on the company's vision of becoming the most trusted retailer in Australia in order to grow long-term shareholder value. It is based on three pillars: Inspire Customers through best value food and drink solutions to make lives easier; Smarter Selling through efficiency and pace of change, and Win Together with its team members, suppliers and communities.
The key pillar in my eyes is the Smarter Selling pillar which aims to deliver $1 billion in cumulative savings by FY 2023 through initiatives including the use of technology to automate manual tasks and simplifying above-store roles to remove duplication.
I suspect that its shares may re-rate higher in the next 12 months if the company starts to show signs of delivering on this $1 billion savings plan.
As a result, I would still be a buyer of its shares at this point even though they have just hit that record high.
