The Woolworths Ltd (ASX: WOW) share price could be trading cheaply right now. Shares in the Aussie retailer are down 2.27% this year having hit a new 52-week high on 20 February. So, with all the volatility in the market right now, is the Aussie retailer in the buy zone?
Is the Woolworths share price cheap today?
I think there’s a lot to like about Woolworths right now. The group’s supermarket division is going strong as sales have surged in 2020. That continues to underpin a strong business model which is starting to look more strategically aligned by the year.
There is the ailing pubs business that is weighing on the Woolworths share price right now: ALH Group. ALH operates 323 licensed venues and over 537 retail liquor outlets across Australia. That encompasses restaurants, bistros and other establishments. However, the coronavirus pandemic has hit that business hard as restrictions have led to temporary closures.
However, restrictions are starting to ease and things could be looking up for Woolworths and its share price. I think it’s fair that Woolworths’ value has dropped in 2020 as the economic environment has changed. However, I think $35.34 may be a little low for a company that has traded as high as $43.96 per share in mid-February.
But Woolworths is trading roughly on par with the Coles Group Ltd (ASX: COL) share price in 2020. That indicates to me that its supermarket performance is being valued similarly to its peers. If we compare conglomerate to conglomerate, the Wesfarmers Ltd (ASX: WES) share price is down 2.49% this year.
If we assume the market is correctly pricing in the current economy, then the Woolworths share price is trading in line with its peers. I think if restrictions continue to ease and Woolworths’ pubs business bounces back quickly, that could make the current $35.34 valuation look cheap.
Foolish takeaway
The Woolworths share price has been on a rollercoaster in 2020. I think the company could be undervalued right now but only if restrictions continue to beat expectations. I’m not willing to speculate at the current price given it’s trading roughly in line with its closest peers.
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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, Wesfarmers Limited, 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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