I've been buying one ASX share heavily over the past few weeks. And as long as it stays at the current level of around $5.30, I'll be tempted to buy even more.
Endeavour Group Ltd (ASX: EDV) is the share in question. I picked up even more Endeavour shares last week when this ASX 200 consumer staples stock was exploring new 52-week (and all-time) lows of under $5.30 a share.
Today, Endeavour is going for $5.28 at the time of writing, down 1.31% at present. But on Monday, the bottle shop and pub operator descended as low as $5.24, the new 52-week low for Endeavour. It's also the lowest Endeavour shares have ever traded on the share market.
Remember, this is a company that was only spun out of Woolworths Group Ltd (ASX: WOW) in June 2021, as you can see below:
Today, Endeavour shares are down more than 13% from where they started ASX life back then.
So why can't I stop buying this ASX share?
Well, put simply, I've been buying because I think Endeavour is a quality company trading at a significant discount to its true value.
Why I can't stop buying Endeavour at $5.30 a share
Endeavour really began to get on investors' nerves after the company released its latest earnings report, covering the 2023 financial year, last month. As we discussed at the time, these earnings saw Endeavour report a 2.5% rise in group sales to $11.9 billion. Not to mention an increase in earnings before interest and tax of 10.7% to $1.02 billion.
Net profits after tax also jumped by 6% to $529 million. This all enabled Endeavour to ramp up its full-year dividends for 2023 by 7.9% to 21.8 cents per share.
The Australian economy has faced a few challenges over the past 12 months or so, with rising inflation and interest rates working to cool consumer sentiment. In light of that, I thought these Endeavour earnings were a robust display of the company's resilience and quality. Yet the markets evidently disagreed.
At the current share price, Endeavour is trading on a price-to-earnings (P/E) ratio of under 18. I think that is far too cheap for a business like Endeavour. This is a company that owns the two most dominant bottle shop chains in the country — Dan Murphy's and BWS. Endeavour also owns a string of pubs, which adds to its earnings base nicely.
So we have a cheap, dominant company trading for a P/E ratio that looks especially compelling right now. For some comparisons, Endeavour's consumer staples fellows Woolworths and Coles Group Ltd (ASX: COL) are trading on P/E ratios of 28.56 and 20.28 today.
As such, I'm buying Endeavour as a value play here. And I will continue to be tempted to do so as long as the shares remain at levels around $5.30 a share.
