The Woolworths Group Ltd (ASX: WOW) share price has been a good performer in the 2023 calendar year to date. It’s up by almost 10%. That compares to just a 1% rise for the S&P/ASX 200 Index (ASX: XJO)

I don’t think Woolworths shares are going to keep outperforming the S&P 200 by 9% per month this year. But the supermarket business could still represent a good opportunity at this level.

With that in mind, let’s have a look at one expert’s view on the company.

The Woolworths share price is ‘fully valued’

Writing on The Bull, Arthur Garipoli from Seneca Financial Solutions pointed out that the recent FY23 half-year result was “marginally ahead of analyst forecasts”.

He noted that group sales were $33.17 billion, before significant items – this represented an increase of 4% on the prior corresponding period. Earnings before interest and tax (EBIT) grew by 18.4% to $1.64 billion. Garipoli said that food sales were up and the performance of the Big W store performance “improved”.

The supermarket business also pointed out that underlying earnings per share (EPS) grew by 11.7% while the dividend per share went up by 17.9% to 46 cents per share.

While food sales only increased by 2.5%, the food EBIT jumped 18.2%. This was boosted by a 48 basis point (0.48%) increase in the gross profit margin to 30.7% and a 30 basis point decline (0.3%) in the cost of doing business (CODB).

In other words, Woolworths has been able to achieve higher margins on the products it’s selling, despite inflation impacts, and reduce its costs thanks to lower COVID costs.

After analysing these numbers, Garipoli said:

In our view, the company is fully valued at this point.

Outlook

Sometimes, outlook comments can have a sizeable impact on the Woolworths share price.

The Woolworths CEO Brad Banducci said that the business had a strong start to the FY23 second half.

Operating conditions have “continued to stabilise and sales growth has been robust”, he said.

In Australian food, the company reported Woolworths’ sales for the first seven weeks of the second half had increased by 6.5%.

Cost growth in the FY23 second half will “also benefit from the non-recurrence of COVID costs”. It’s also making “good progress on regaining momentum” with its productivity agenda. However, cost inflation in areas like “wages, energy, and supply chain” remains “material and well above recent history”.

Woolworths share price snapshot

At the current valuation, the supermarket business has a market capitalisation of $45 billion according to the ASX.

The post Should I buy Woolworths shares at $37? appeared first on The Motley Fool Australia.

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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 no position in any of the stocks mentioned. 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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