Coles share price hits a record high: Too late to invest?

The Coles Group Ltd (ASX:COL) share price has just hit a record high. Is it too late to invest?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended 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.

More on Record Highs

A smiling woman puts fuel into her car at a petrol pump.
Energy Shares

How has this ASX 200 energy stock just hit another new record high?

This energy stock can't stop clocking new highs.

Read more »

ETF spelt out with a rising green arrow.
ETFs

4 top ASX exchange-traded funds smashing record highs on Wednesday

If you own any of these popular ETFs, congratulations!

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Record Highs

ASX 200 soars to another new all-time high on Friday!

Exuberant investors just sent the ASX 200 to another new all-time high.

Read more »

A beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices today
Share Market News

The ASX 200 just hit another new record high on Monday

The ASX 200 just breached Friday’s record to set a new all-time high today.

Read more »

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Technology Shares

The Nasdaq just hit a fresh all-time high. What could it mean for Aussie investors?

With the Nasdaq at fresh highs, ASX tech shares are reaping the benefits.

Read more »

ETF written in gold with dollar signs on coin.
ETFs

4 hot ASX ETFs smashing all-time highs on Thursday

ETFs are on fire this Thursday.

Read more »

Yellow rising arrow on a brick wall with a man on a ladder.
Record Highs

How did the Brickworks share price just hit an all-time high?

This stock is building up investor excitement.

Read more »

rising asx share price represented by drone flying in the air
Technology Shares

How has the DroneShield share price gained 90% in a month?

DroneShield shares are once again at a new record high today.

Read more »