Woolworths Group Ltd (ASX: WOW) shares are currently trading around $31, a level that sits well above the company's multi-year low reached in 2025, but still meaningfully below where the market valued the business at its peak.
That positioning makes the investment question more nuanced than it might first appear. Woolworths is widely regarded as one of the highest-quality defensive businesses on the ASX, but a great company does not automatically equal a slam-dunk investment at any price.
So, at $31, do the shares still offer compelling value?
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Why Woolworths shares fell in the first place
Woolworths' share price weakness over the past year was driven by an unusually poor operating period. Cost pressures intensified across wages, energy, and logistics, while competition in food retail remained fierce. At the same time, consumers became increasingly price sensitive, forcing heavier discounting that compressed margins.
Execution issues also emerged, particularly within its supply chain and e-commerce operations. While none of these challenges were existential, they were enough to disrupt earnings momentum in a business that investors had come to view as extremely stable.
The result was a sharp reset in expectations and a meaningful share price decline.
What has improved since then
Since hitting its low, Woolworths has shown signs of stabilisation. Sales momentum has improved, cost pressures are easing, and management has refocused on operational discipline.
Importantly, Woolworths still benefits from defensive characteristics that few ASX businesses can match. Demand for groceries is resilient across economic cycles, and the company's scale provides structural advantages in sourcing, distribution, and pricing.
Consensus expectations point to a recovery in earnings over the next few years and a return to steady growth. For example, according to CommSec, earnings per share (EPS) is forecast to be $1.28 in FY26, $1.45 in FY27, and $1.66 in FY28.
Is the valuation still attractive at $31?
At around $31, Woolworths is no longer trading at distressed levels. The market has already priced in a degree of recovery from its worst period.
However, at a P/E ratio of 24 times, the shares also do not look to be trading on a stretched valuation. Particularly given the outlook for double-digit EPS growth through to FY28.
Additionally, for income-focused investors, the dividend outlook remains supportive. Consensus estimates point to fully-franked dividends per share of 99.5 cents in FY26, $1.13 in FY27, and $1.35 in FY28.
This represents forward dividend yields of 3.2%, 3.65%, and then 4.35%.
So, is it a slam-dunk buy?
I think the answer is increasingly yes.
While Woolworths shares are no longer priced at bargain-basement levels, the investment case today looks far stronger than it did a year ago. Earnings are recovering, cost pressures are easing, and management has refocused on operational execution. Importantly, this recovery is occurring within a business that already enjoys highly defensive demand, scale advantages, and strong cash generation.
At a forward P/E of around 24 times, Woolworths does not look cheap in absolute terms. But when that valuation is weighed against its defensive qualities, the outlook for steady double-digit earnings growth through to FY28, and a rising stream of fully-franked dividends, it begins to look reasonable for a business of this quality.
