WOW share price in focus
Founded in 1924, Woolworths is a retail operator in Australia and New Zealand with over 3,000 stores and over 100,000 employees. It is one of Australia’s largest companies in terms of revenue and market share.
Woolworths’ main operations include supermarkets (under the Woolworths brand in Australia and Countdown in New Zealand), retailing through its discount department stores under the Big W brand, and business-to-business (B2B) brands like PFD. However, its 35%+ market share of Australian groceries is undoubtedly its crown jewel.
Woolworths is a very popular choice for many ASX investors seeking dividend income. Historically, it has consistently paid a fully franked dividend, usually at a yield of over 3%, and offers a very defensive earnings stream with most revenue coming from consumer staples. Its competitive advantage is best summarised as scale (distribution, low costs, etc.) and proximity (most shoppers still shop based on distance to the supermarket).
QAN shares
Qantas was founded in 1921 and is today Australia’s largest airline operator by fleet size, number of international flights, and number of destinations.
It’s involved in the operation of domestic and international flights under its Qantas and Jetstar brands, as well as freight services and the management of its frequent flyer loyalty program.
Despite (or perhaps because of) its significant market power, the airline has fallen out of favour with Australian consumers over the last few years, consistently ranking as one of the country’s most distrusted brands according to Roy Morgan surveys. Still, with a huge market share and more services than other airlines they’ve managed to continue growing revenue and profit since the end of the pandemic.
WOW share price valuation
We would consider WOW to be a ‘mature’ or ‘blue-chip’ business, so some of the metrics that could be worth considering include the debt/equity ratio, average yield, and return on equity, or ROE. These measures give us a sense of the company’s debt levels, their ability to generate returns from their assets, and their ability to consistently return profits to shareholders.
For FY24, Woolworths Group Ltd reported a debt/equity ratio of 300.2%, meaning the company is leveraged (it has more debt than equity). This can increase risk so it’s important that a leveraged company is generating stable returns and has sufficient cash flow to pay interest on its debts.
Over the last 5 years, WOW has delivered an average dividend yield of 2.9% per year. This is important to note if you’re looking for income from your investments.
Finally, in FY24, WOW reported an ROE of 1.9%. For a mature business you generally want to see an ROE of more than 10%, so WOW’s returns are a bit less than what we’d expect.
In FY24, Qantas Airways Limited reported a debt/equity ratio of 2241.8%, meaning the company is leveraged.
As for dividends, since 2019 QAN has achieved an average dividend yield of 1.2% per year, and in FY24 reported an ROE of 823.0%
It’s important to keep in mind that these are only a small selection of metrics and don’t give us enough information to value the business or make an investment decision. To learn more about valuation, check out one of our free online investing courses.
