Why this broker sees the Coles (ASX:COL) share price rising 15%

Now could be a good time to buy Coles shares according to one leading broker…

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The Coles Group Ltd (ASX: COL) share price is pushing higher on Thursday afternoon.

At the time of writing, the supermarket giant's shares are up almost 1% to $17.15.

This means Coles' shares have now reduced their year to date decline to approximately 7%.

A young boy pushing his friend in a shopping trolley race along the road.

Image source: Getty Images

Is the Coles share price good value?

While the weakness in the Coles share price this year is disappointing for shareholders, it could be a buying opportunity for non-shareholders.

According to a recent note out of Morgans, its analysts have an add rating and $19.80 price target on the company's shares.

Based on the current Coles share price, this suggests there is 15% upside over the next 12 months before dividends.

And if we include dividends, the potential return gets even more attractive. Morgans is forecasting a fully franked 61 cents per share dividend in FY 2022. Including this, the company's shares could provide a total return of 19% between now and this time next year.

What did the broker say?

Morgans was pleased with the company's performance in FY 2021 and also with its solid start to the new financial year. This led the broker to upgrading its forecasts for FY 2022 and its price target on the Coles share price accordingly.

In addition to this, its analysts like Coles due to its defensive qualities, strong market position, and robust balance sheet.

The broker commented: "Following the better-than-expected FY21 result, we increase FY22F EBIT by 2% to A$1,852m while underlying NPAT rises by 4% to A$996m. COL is a defensive business with strong market positions and a healthy balance sheet. Trading on 24.6x FY22F PE and 3.3% yield we continue to see the stock as offering good value and maintain our Add rating."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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