This retail giant could be one of the best ASX value shares around!

Goldman Sachs thinks this stock is dirt cheap at current levels.

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Investors that are on the lookout for great value ASX shares might want to check out supermarket leader Woolworths Group Ltd (ASX: WOW).

That is because one leading broker believes the retail giant could be undervalued by the market.

What is the broker saying about this ASX share?

According to a note from last week, Goldman Sachs thinks Woolworths shares are such good value that they are one of only four from the ASX that feature on its coveted Asia-Pacific conviction list.

This list contains only the crème de la crème of financial markets in the Asia-Pacific region and currently contains a total of 29 companies.

The note reveals that Goldman has a conviction buy rating and $40.20 price target on its shares. Based on the current Woolworths share price of $33.48, this implies sizeable potential upside of 20% for investors over the next 12 months.

The retail giant is also a keen dividend payer and Goldman expects a growing income stream from its shares in the coming years. After paying a $1.04 per share dividend in FY 2023, the broker is forecasting this to increase to $1.07 per share in FY 2024, $1.13 per share in FY 2025, and then $1.22 per share in FY 2026.

This equates to fully franked dividend yields of 3.2%, 3.4%, and 3.6%, respectively.

Why is Goldman so bullish?

Goldman is a big fan of this ASX share due to its strong market position and consumer stickiness and loyalty. It believes this leaves Woolworths well-positioned to grow its market share and pass through any cost inflation.

In addition, it highlights that despite these qualities and its positive outlook, the Woolworths share price is trading on lower than normal multiples. It feels that this makes now an opportune time to snap up its shares. Goldman summarises:

WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. We are Buy rated on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as its ability to pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock.

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 positions in and has recommended Goldman Sachs Group. 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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