The Fortescue Ltd (ASX: FMG) share price is trading around $16.29 on Friday, only slightly above its 52-week low of $16.13.

At first glance, that might look like an attractive entry point for one of Australia’s biggest miners.

But I think the valuation needs a closer look before calling the shares cheap.

Cheap based on past earnings

Fortescue generated earnings per share (EPS) of $1.71 in FY26. Against today’s share price, that puts the stock on a price-to-earnings (P/E) ratio of roughly 9.5 times.

That certainly looks inexpensive. The company also paid $1.08 per share in dividends for FY26, which represents a high trailing dividend yield at the current share price.

The problem is that analysts are not expecting those earnings or dividends to hold.

Consensus forecasts point to EPS falling to $1.33 in FY27, then to $1.21 in FY28, and to $1.12 in FY29.

That changes the valuation considerably. At $16.29, Fortescue is trading on around 12 times FY27 earnings, rising to roughly 13.5 times FY28 earnings and about 14.5 times FY29 earnings.

So the further out I look, the less obvious the bargain becomes.

The dividend tells a similar story

The income outlook follows the same direction.

Consensus forecasts point to dividends of 85 cents per share in FY27, 76.8 cents in FY28, and 70 cents in FY29.

Those would still provide reasonable yields at today’s price, but they are a long way below the $1.08 paid in FY26.

For income investors, I think that is important. A high historical yield can look tempting, but what ultimately counts is what Fortescue can afford to distribute from future earnings.

Right now, the market expects both profits and dividends to decline.

What could push the Fortescue share price higher?

For me, the key would be a change in the earnings trajectory.

If consensus forecasts remain where they are, I struggle to see why investors would suddenly pay a much higher earnings multiple for Fortescue.

A stronger iron ore price could change that picture, as could better-than-expected production, costs, or progress elsewhere in the business.

But based on the numbers currently expected, the company would be earning far less in FY29 than it did in FY26.

That makes it difficult for me to build a strong re-rating case.

Would I buy Fortescue shares?

I would stay on the sidelines for now.

I think Fortescue is more of a hold than a sell at $16.29. The valuation is not excessive, and existing shareholders may still be comfortable owning the business through the commodity cycle.

But if I were putting fresh money into the resources sector, I would prefer BHP Group Ltd (ASX: BHP) shares.

BHP gives investors exposure to both iron ore and copper, which provides a broader mix of commodity drivers and, in my view, a stronger long-term growth story.

Foolish takeaway

The Fortescue share price looks cheap based on FY26 numbers. The problem is that the forecasts are heading in the wrong direction.

Until I see signs that earnings can stabilise or start growing again, I think the shares are closer to fair value than bargain territory.

For now, I would hold rather than buy.

The post Is the Fortescue share price a cheap buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino 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 recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Wesfarmers Ltd (ASX: WES) shares have underperformed over the past 12 months, slipping 17.1% over the period.

The analyst team at Jarden believe a turnaround is on the way, however, with a modest share price improvement forecast over the next year.

Muted revenue growth for FY26

Wesfarmers, which owns Bunnings, Kmart, and its lithium mining operations WesCEF, grew its revenue in FY26 by just 3.4% to $47.3 billion.

Net profit came in at $2.9 billion, down 1.8%.

The Jarden team said the drop in the Wesfarmers share price over the past year meant that it was “nearing its oversold territory”.

They added:

The weakness is a function of negative earnings per share revisions and macro concerns. We view these concerns as overdone – with WES’ retail divisions consistently growing regardless of the cycle.

Jarden said Australian consumers were facing headwinds, with cost-of-living pressures eroding cash flow and discretionary spending growth halving.

With this as the backdrop, they looked at Wesfarmers’ performance over the past 20 years to assess how it performed through the cycles.

Our conclusion: a combination of share gains, space growth, expandable categories and an everyday low pricing offer that outperforms in cyclical downturns, has seen WES’ brands consistently deliver sales growth over the past 20yrs. The above, combined with its category killer status and marketplace/AI push, leaves WES retail well-positioned to continue this growth. We see limited risk to consensus, with market margin forecasts arguably conservative, led by Bunnings, which is forecast to contract 6 basis points in FY27. This is despite sourcing, productivity and mix benefits that should see Bunnings continue its 2H26 margin trend, the biggest lift since 2021.  

Jarden said Wesfarmers management was executing well, with a clear plan, and they believed there was upside developing into FY28.

They said there was an opportunity for Wesfarmers to become the leading customer-facing business in Australia across health, consumables, and energy, “and while this will take time and money, we don’t believe it’s reflected in the current share price”.

Jarden said earnings growth was likely to accelerate into FY28 as Wesfarmers’ digital and AI push drove better return on invested capital, similar to the experience of Walmart in the US.

Share price should appreciate

Jarden has a price target of $83.20 for Wesfarmers shares, compared with the current $75.77.

If achieved, this would constitute a 9.8% return, with the company also paying a 3.3% dividend yield.

Wesfarmers is valued at $85.9 billion.

The post In a tough retail environment, what’s the outlook for Wesfarmers shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Walmart and Wesfarmers. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Commonwealth Bank of Australia (ASX: CBA) and Coles Group Ltd (ASX: COL) shares are starting October from very different positions.

CBA shares are trading around $150.30 on Friday, not far from their 52-week low. Coles shares, meanwhile, are around $23.05 and much closer to their 52-week high.

Even so, I would be happy to buy both.

CBA shares

CBA has become more interesting to me as the share price has moved closer to the lower end of its recent range.

The shares are only slightly above their 52-week low of $146.97, which gives investors a much better starting point than they had earlier in the year.

I still would not call CBA cheap in an absolute sense. Consensus forecasts point to earnings per share (EPS) of $6.67 in FY27 and $6.86 in FY28, compared with $6.58 in FY26. That means investors are still paying a premium for fairly modest earnings growth.

But I think there are reasons the market consistently gives CBA that premium.

It is Australia’s largest bank, has a powerful deposit franchise, and remains a leader in digital banking. Those strengths have helped it build a highly profitable business that I would be comfortable owning through different economic conditions.

The dividend supports the buy thesis. CBA paid $5.05 per share in FY26, with consensus forecasts pointing to dividends of $5.15 in FY27 and $5.30 in FY28. This represents dividend yields of 3.4% and 3.5%, respectively.

For me, I like the combination of quality, resilience, and a gradually rising dividend at a share price much closer to the year’s lows.

Coles shares

Coles is a different story. Its shares are trading around $23.05, not far from their 52-week high of $24.59. Ordinarily, that might make me more cautious.

But I think the earnings outlook gives the share price some support.

Coles generated EPS of 81.3 cents in FY26. Consensus forecasts point to EPS of 98.2 cents in FY27, $1.05 in FY28, and $1.15 in FY29.

That is a much stronger growth profile than CBA, with earnings expected to rise by more than 40% between FY26 and FY29.

I like that Coles combines this growth with the defensive qualities of supermarkets.

Australians still need groceries regardless of what is happening in the broader economy, while improvements in efficiency, supply chains, and operations can help Coles turn steady sales growth into stronger earnings.

The dividend is also expected to move higher, from 78 cents in FY26 to 83.5 cents in FY27, 88.8 cents in FY28, and 97.4 cents in FY29.

So while the shares are close to their highs, I think the business has the earnings growth to justify a higher valuation than it commanded a few years ago.

Foolish takeaway

I would be buying CBA and Coles shares for different reasons in October.

CBA appeals to me because the share price has come back towards its lows while the underlying business remains strong.

Coles is closer to its highs, but I think its earnings trajectory gives the shares room to keep progressing.

For me, both still deserve a place on the buy list.

The post Why I’d buy CBA and Coles shares in October appeared first on The Motley Fool Australia.

More reading

• If I invest $10,000 in ANZ shares, what passive income could I receive in FY27?
• Are ASX 200 bank stocks a buy in October?
• Commonwealth Bank vs BHP: Which ASX blue chip is the better buy in October?
• 5 leading ASX shares I’d buy and hold until 2040
• Commonwealth Bank vs ANZ: Which is better for passive income?

Motley Fool contributor Grace Alvino has positions in Commonwealth Bank Of Australia. 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.