Near a 52-week low, this ASX 200 stock looks like a buy to me

This household name is on the nose right now, but it could be a perfect buying opportunity.

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Earlier this week, a prominent ASX 200 stock reported its latest earnings, covering the full 2023 financial year. The markets seemed to detest what this company had to say yesterday and has sent it down to a new 52-week low today.

We're talking about Coles Group Ltd (ASX: COL) shares, of course. As we covered yesterday, Coles certainly gave investors a mixed bag to digest when it came to its FY2023 numbers.

While Coles reported a 5.9% rise in revenues to $40.5 billion, higher costs dragged the company's operational net profit after tax (NPAT) 0.3% lower to $1.04 billion. Coles blamed these higher costs on inflationary pressures, higher borrowing bills, and additional funds expended on its distribution and fulfilment centres.

Investors weren't impressed, to say the least. Yesterday, the markets sent this ASX 200 stock down a nasty 7.08%. At the time of writing, Coles has lost another 0.31% and is presently down to $15.96 a share. That's after the company hit a new 52-week low of $15.70 earlier this morning.

However, I still reckon this ASX 200 stock is a buy today.

Why I think this ASX 200 stock is a buy right now

Coles' latest earnings don't faze me at all. The higher costs are unwelcome of course. But inflation across the Australian economy continues to ease. So I don't think Coles will continue to suffer from inflationary pressures over the coming year and beyond by quite as much.

In addition, Coles is an ASX 200 consumer staples stock, so the company should be able to pass on higher costs over the long term anyway. After all, we all need to eat, regardless of inflation. No doubt that 5.9% rise in revenues over FY23 was partially funded by price increases.

Market analyst at eToro Farhan Badami agrees. Here's some of what he said on Coles' earnings:

Australia is currently witnessing one of its highest points of food inflation. This surge in costs has prompted consumers to tighten their spending habits, particularly when it comes to dining out.

As a result, households are opting for fewer restaurant meals and are instead leaning toward supermarket purchases. To manage the impacts of inflation, the supermarket giant has been transferring some of the increased costs to the consumers, which has benefited its margins.

Higher borrowing costs aren't a surprise either, considering how interest rates have rocketed over the past year or so. All companies in Australia would be facing the same issue there. And while the costs that Coles has incurred for its distribution and fulfilment centres are also unwelcome, they should prove to be relatively temporary.

I was also impressed that this ASX 200 stock once again upped its dividends this year. Yesterday, Coles announced a final dividend of 30 cents per share, fully franked, for 2023. That will take its full-year dividends for 2023 to 66 cents per share, which is a nice rise over 2022's total of 63 cents. 2023 will be the fourth year in a row that Coles has given its investors an annual dividend pay rise.

Foolish takeaway

So all in all, I see strength in Coles' fundamentals. And yet, this ASX 200 stock is now down to a price-to-earnings (P/E) ratio of just 18.6. That looks pretty cheap to me, especially when you consider that Coles' arch-rival Woolworths Group Ltd (ASX: WOW) is on a P/E of 27.43 right now.

That lower earnings multiple means a higher dividend yield too. Right now, Coles offers a dividend yield of 4.12%, which if you remember, comes fully franked as well.

So, all in all, I think you could certainly do a lot worse than Coles if you are after a solid, reliable ASX 200 stock and dividend payer for your portfolio today.

Motley Fool contributor Sebastian Bowen 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 has no position in any of the stocks mentioned. 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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