Insights

The Wesfarmers share price is trading at 2-year lows. Time to plough in?

Wesfarmers shares have been falling. Is it time to jump on the conglomerate?
The post The Wesfarmers share price is trading at 2-year lows. Time to plough in? appeared first on The Motley Fool Australia. –

The Wesfarmers Ltd (ASX: WES) share price has been sliding lower and today hit a two-year low of $44.65. Could now be a good time to consider buying shares in the retail conglomerate?

At the close of trade, Wesfarmers shares are down 0.7% at $45.24. They have fallen almost 25% since the beginning of the year and are closer than ever to the March lows seen in the COVID-19 crash of 2020.

Is the Wesfarmers share price a buying opportunity?

It’s an interesting question, considering interest rates are rising and inflation is building in Australia.

Ray Dalio, the billionaire founder of Bridgewater Associates, explains why interest rates are so important for asset values:

It all comes down to interest rates. As an investor, all you’re doing is putting up a lump sum payment for a future cash flow.

There has been plenty of the elevated inflation in different areas of the economy, such as energy, during 2022, particularly after the Russian invasion of Ukraine. So, the second half of FY22 will deliver the results for investors to keep an eye on.

How is the company coping with inflation?

Wesfarmers said in February 2022 that it was actively managing increasing inflationary pressure and would leverage its scale to mitigate the impact of rising costs. It also said the group’s retail businesses would “increase their focus on price leadership”.

However, the company did note that it was incurring additional costs and experiencing stock availability issues due to the global supply chain disruptions, elevated team member absenteeism and delays with third-party logistics providers.

In the first half of FY22, Wesfarmers reported that its underlying net profit after tax (NPAT) fell by 14.2% to $1.2 billion. I think it will be interesting to see how Wesfarmers has responded to inflation in the six months to June 2022.

Challenging times for Wesfarmers

Things are looking a bit tougher for Wesfarmers. Australian households may not have as much money to spend at the retail giant’s brands such as Bunnings, Officeworks, Kmart, Target and Catch.

Falling Australian house prices could also be a headwind for Bunnings’ earnings if people spend less on improving their houses and more on loan repayments instead.

But plenty of tailwinds…

I think that Wesfarmers is one of the best businesses on the ASX. It has proven to be effective at buying the right businesses and building them into strong brands for the long-term future. This includes the Mt Holland lithium project.

While earnings may drop in the shorter-term, the company is doing the right thing by building new growth avenues, in my opinion. The Australian Pharmaceutical Industries acquisition is the beginning of a health and beauty division for Wesfarmers, opening up another earnings stream for the company.

Bunnings is one of the leading retailers in the country, I believe. It earns strong profit for Wesfarmers and it has the ability to grow through expansion with other businesses such as its recent acquisition of  Beaumont Tiles.

I think that the Wesfarmers share price is also attractive because the business continues to pay attractive dividends to shareholders. That’s a useful way to boost total returns.

I believe that Wesfarmers is a long-term opportunity. The diversified nature of the business lowers the risk in times like this and opens up more potential opportunities, in my opinion.

The post The Wesfarmers share price is trading at 2-year lows. Time to plough in? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Wesfarmers right now?

Before you consider Wesfarmers, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Wesfarmers wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

Belt tightening? 5 ASX 200 consumer shares slipping to new 52-week lows today
ASX retail shares tumble following RBA rate rise
Why this top broker is tipping the Wesfarmers share price to rise 24%
Top brokers name 3 ASX shares to buy next week
What’s in store for the Wesfarmers share price in June?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info