The Coles Group Ltd (ASX: COL) share price could be a value play after its recent fall after reporting in February.
What’s happening to the Coles share price?
Since 16 February 2021, the Coles share price is still down by around 10%.
That’s not terribly surprising considering Coles is now telling investors that it’s struggling to deliver the same strength of sales as it did 12 months ago during the hardest COVID-19 times.
FY21 third quarter total supermarket sales were down 6.1% year on year to $7.7 billion. The business is now cycling against the COVID-19 impacts that included high levels of pantry stocking.
However, Coles also included a reference to the performance two years ago. Sales went up 6.8% compared to two years ago.
There was growth in the one-year growth statistics for liquor and Coles Express sales. Liquor revenue rose 2.6% to $759 million and Express sales increased 7.4% to $275 million.
In the first four weeks of the FY21 fourth quarter, supermarket sales (adjusted for ANZAC Day timing) increased by approximately 4% while the growth rate over two years was approximately 8%.
Could it be a value play?
It’s an interesting idea – it isn’t a high growth tech share, it isn’t an asset play and it isn’t very dependent on interest rates in terms of the profit and loss.
Using the earnings forecast on CommSec, the latest Coles share price was valued at 22 times the estimated earnings for the 2021 financial year.
It’s not cheap for a business that’s now growing in the single digits. But then again, you can compare to the valuation of Woolworths Group Ltd (ASX: WOW). Using CommSec numbers, Woolworths is priced at 27 times the estimated earnings for this financial year.
When you compare the two supermarket businesses, Coles is quite a bit cheaper. That certainly helps with the dividend yield too. The Coles FY21 yield is expected to be 3.8%, fully franked.
Coles could be one of those slow-and-steady blue chip type investments, but I don’t think it’s something that I’m looking to buy for my own portfolio.
I’m looking for other ASX dividend shares that might have better growth potential.
