3-year low: Are Coles shares still cheap today?

It was only yesterday that we saw a new 52-week low for Coles…

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It's been a fantastic day for the Coles Group Ltd (ASX: COL) share price this Friday. At present, Coles shares are up a rosy 2.4% to $15.34 each, handily beating the S&P/ASX 200 Index (ASX: XJO), which is currently up 0.3%.

However, we can't ignore the fact that the Coles share price remains historically cheap, even after this big Friday bounce. After all, it was only yesterday that we saw Coles sales ink a new 2-week low of $14.82 a share.

Not only was that a new 52-week low, but it was also the lowest that this ASX 200 consumer staples share has plumbed in more than three years. You'd have to go back to the COVID-ravaged days of early 2020 to find the last time that the Coles share price had a '14' at the front of it. Check it out for yourself below:

Coles share price performance

So it looks as though Coles shares still remain exceptionally cheap, at least compared to their historical levels. After all, this company was going for over $19 a share as recently as August 2022.

But perhaps Coles is cheap for a reason. Yesterday's new 52-week low was prompted by a first-quarter update from the company, which made for some interesting reading. As we covered at the time, this update saw Coles report a 3.6% rise in group sales over the three months ending 24 September.

However, investors didn't seem impressed (hence the new 52-week low), given that Coles' arch-rival Woolworths Group Ltd (ASX: WOW) reported growth of 6.4% over the same period. As my Fool colleague James posited at the time, this "suggests potential market share losses".

Are Coles shares a cheap buy or damaged goods?

So perhaps investors might be wondering if Coles is a cheap buy and represents value as an investment today, or else is cheap for a reason.

Firstly, we discussed the investment thesis of Coles earlier this month. At the time, I posited that Coles is a quality company that can offer investors a defensive and fully-franked stream of dividend income. That remains my position today, considering the dividend yield for Coles shares now stands at an impressive 4.4%.

In my view, you could certainly do worse if you're looking for a reliable dividend payer for a passive income portfolio.

But earlier this week, my Fool colleague also discussed the current views of ASX broker Citi on Coles shares.

Citi has a buy rating on Coles right now, with a 12-month share price target of $18.30. If that were to become reality, it would see investors enjoy an upside of almost 20% from where the shares sit today.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended Coles Group. 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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