Woolworths Group Ltd (ASX: WOW) shares are in the green today.
Shares in the S&P/ASX 200 Index (ASX: XJO) supermarket giant closed yesterday trading at $29.42. In afternoon trade on Tuesday, shares are changing hands for $29.52 apiece, up 0.3%.
For some context, the ASX 200 is down 0.1% at this same time.
Taking a step back, Woolies has underperformed the 4.6% 12-month returns delivered by the benchmark index, with shares down 3.6% over the full year.
Although those losses will have been somewhat mitigated by the 84 cents a share in fully franked dividends the company paid out over the year. Woolworths shares currently trade on a 2.9% fully franked trailing dividend yield.
As you're likely aware, shares in the ASX 200 supermarket have yet to recover from the sharp sell-down that followed the company's FY 2025 results release on 27 August.
Despite a 13.6% rebound since 15 October, shares remain down 11.5% since market close on 26 August.
Which brings us back to our headline question.
Should you buy Woolworths shares today?
Alto Capital's Tony Locantro recently ran his slide rule over Woolworths stock (courtesy of The Bull).
"The supermarket giant's full year 2025 results fell short of market expectations, highlighting margin pressure and subdued sales growth," Locantro said.
Indeed, Woolworths shares closed down a sharp 14.7% on the day those results were reported.
ASX investors were pressing their sell buttons after the company revealed that its gross margin slipped 0.07% year-over-year to 27.2%.
This came amid rising costs, with Woolies reporting a 0.66% increase in its cost of doing business to 23.3%.
And earnings before interest and tax (EBIT) in FY 2025 took a sizeable hit, falling by 12.6% from FY 2024 to $2.75 billion.
On the bottom line, the net profit after tax (NPAT) of $1.39 billion declined by 17.1% year-over-year. This led management to cut the final dividend by 21.1% from the FY 2024 payout to 45 cents per share, fully franked.
With this in mind, Locantro believes the ASX 200 stock is trading for a premium.
"WOW was recently trading on a lofty price/earnings ratio of about 37 times, which leaves limited upside, in our view," he said.
Summarising his sell rating on Woolworths shares, Locantro concluded:
Rising costs combined with subdued discretionary spending suggest growth and profitability may remain constrained. We believe much of the upside is already priced in, so investors may want to consider taking some gains in a high cost, low growth environment.
