The Coles Group Ltd (ASX: COL) share price rocketed 11.8% higher in June, but can it repeat the trick this month?
Why the Coles share price surged in June
There have been no new ASX announcements from the Aussie supermarket group since 22 May. This means it’s purely investor sentiment that has pushed the Coles share price higher in June.
Prior to June, Coles’ market value had been sinking lower for a couple of months. As it stands right now, the ASX supermarket share is worth $22.9 billion and is firmly inside the ASX 20.
Coles wasn’t the only ASX share to climb higher in June with the S&P/ASX 200 Index (ASX: XJO) gaining 2.5% to close the month at 5,897.9 points.
In relation to the Aussie supermarket sector, there was one announcement that piqued my interest last month, however it wasn’t from Coles. SCA Property Group (ASX: SCP) provided a trading update and it suggested some good news for supermarkets like those run by Coles and Woolworths Group Ltd (ASX: WOW).
SCA reported that sales performance for a number of its tenants had been volatile due to the coronavirus pandemic, but the supermarkets were doing better than most. In fact, SCA’s supermarket tenants increased year-on-year moving annual turnover by 4.4% through to 31 May 2020.
That could be a good sign for Coles’ earnings, as we will likely discover in August this year. If the Aussie supermarket group shows a strong growth trajectory, I think the Coles share price could finish the year strongly.
For context, the Woolworths share price also climbed 5.5% higher in June to $37.28 per share.
Is Coles good value at the moment?
I always like to look at the relative value of shares against their peers. Woolworths shares are currently trading at a price to earnings (P/E) ratio of 18.6x compared to 19.3x for Coles.
This to me says there isn’t a huge difference in the current valuations for the ASX supermarket shares. That said, I still think July could be another strong month for the Coles share price if robust sales continue.
However, I also think the group’s August earnings result will be a good barometer of what to expect for the rest of 2020.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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