Coles Group Ltd (ASX: COL) and Wesfarmers Ltd (ASX: WES) are both high-quality ASX shares with strong positions in Australian retail.

They also share one challenge right now: neither looks especially cheap after strong share price performance.

Coles shares are trading around $23.67, close to the upper end of their yearly range of $20.10 to $24.59. Wesfarmers shares are trading around $90.87, compared with a yearly range of $70.80 to $95.18.

Buying either share near its 52-week low would have been a much easier call. At current prices, I think the comparison becomes more about valuation, income, and how much investors are being asked to pay for future growth.

The numbers favour Coles shares

According to CommSec consensus estimates, Coles is expected to generate earnings per share of 90 cents in FY26 and 96.6 cents in FY27.

Based on the current share price, that puts Coles on a price-to-earnings ratio of around 26.3 times FY26 earnings and 24.5 times FY27 earnings.

Wesfarmers is forecast to generate earnings per share of $2.55 in FY26 and $2.74 in FY27.

That puts Wesfarmers on a much higher price-to-earnings ratio of around 35.6 times FY26 earnings and 33.2 times FY27 earnings.

That is a meaningful gap.

I believe Wesfarmers deserves a premium for its track record, culture, and capital allocation. But when forecast earnings growth appears broadly similar over the next couple of years, I think Coles looks more attractive on a valuation basis.

The dividend yield also points to Coles

The income comparison also favours Coles.

CommSec estimates dividends per share of 75.5 cents in FY26 and 82 cents in FY27. That implies forward dividend yields of around 3.2% and 3.5%.

Wesfarmers is forecast to pay dividends per share of $2.16 in FY26 and $2.33 in FY27. That implies forward yields of around 2.4% and 2.6%.

That difference is useful for investors who want income as well as long-term defensive exposure.

Coles also has a fairly simple appeal. Groceries are a repeat purchase. Customers may change habits, trade down, or shop around more carefully, but food and household essentials remain part of everyday spending.

That gives Coles a defensive quality I value in the current environment.

I still like Wesfarmers shares

I would still be happy to buy Wesfarmers shares for the long term.

The company has an excellent record of building strong retail businesses, managing capital carefully, and reinvesting in areas where it sees attractive returns.

I also like the breadth of the group. Wesfarmers gives investors exposure to more than one consumer category, and that flexibility has helped it create value over many years.

The issue today is price.

At more than 33 times FY27 estimated earnings, the share price already reflects a lot of confidence. I can see the case for buying a small amount now and adding more if the valuation becomes more reasonable.

Foolish takeaway

I think Coles shares are the better buy today.

Wesfarmers remains a wonderful long-term business, and I would be happy to own it. But Coles offers the cleaner case right now because it trades on a lower forecast earnings multiple and provides a higher forecast dividend yield.

When two high-quality defensive ASX shares both sit near the top of their yearly ranges, I think valuation has to carry more weight.

At current prices, I would buy Coles first and keep Wesfarmers on my long-term buy list.

The post Which is the best buy, Coles shares or Wesfarmers shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended 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.

Zip Co Ltd (ASX: ZIP) shares have enjoyed an impressive rebound recently, climbing 31% over the past month as investor confidence has returned to the buy now, pay later (BNPL) provider.

Despite that strong run, the stock remains down around 6% year to date. Over the past 12 months, however, Zip shares have gained approximately 2%.

Looking at the bigger picture shows why many investors still see plenty of recovery potential. Zip shares remain about 64% lower than they were five years ago, while the S&P/ASX 200 Index (ASX: XJO) has risen roughly 20% over the same period.

With analysts becoming increasingly optimistic about the company’s earnings outlook heading into FY27, could the recovery still have plenty of room to run?

Strong financial momentum

One of the biggest reasons for the improving sentiment is Zip’s strengthening financial performance.

The fintech company’s results have consistently improved over the past several quarters as management has focused on profitability, disciplined lending, and tighter cost controls.

Its third-quarter FY26 update in April highlighted accelerating momentum across the business. Importantly, management upgraded its FY26 group cash EBITDA guidance to at least $260 million, up from previous guidance of around $248.6 million.

The earnings upgrade demonstrated that Zip is successfully balancing growth with profitability. That’s a key milestone for Zip shares after several challenging years for the BNPL sector.

The US is becoming increasingly important

Another major attraction is Zip’s expanding opportunity in the United States.

The company has been investing heavily in growing both its customer base and product offering in what is now its largest market. The US BNPL market remains significantly underpenetrated compared with Australia and continues to benefit from increasing consumer adoption and merchant demand.

Late last year, Zip expanded its partnership with programmable financial services company Stripe, allowing more merchants to offer Zip’s payment solutions through Stripe’s platform. The partnership provides access to a large network of businesses and could accelerate merchant acquisition over time.

Adding to the opportunity, Zip is pursuing a dual listing on the Nasdaq. A US listing of Zip shares could improve the company’s visibility among American investors, increase liquidity, and potentially support future expansion initiatives in its largest growth market.

Fierce competition, increased volatility

Of course, investors should remember that Zip operates in a highly competitive industry.

The company faces competition from Klarna, PayPal, Block’s Afterpay business, traditional banks, and credit card providers. Intense competition could weigh on margins or slow customer growth.

As a growth stock, Zip is also sensitive to changes in investor sentiment, interest rates, consumer spending, and employment conditions. That means Zip shares are likely to remain more volatile than many defensive businesses.

What are the experts saying?

According to TradingView data, analysts remain overwhelmingly positive on Zip’s outlook.

Of the 12 analysts covering the company, 11 have either a buy or strong buy recommendation. Their average price target of $4.17 suggests around 36% upside from current levels.

Some analysts are even more bullish, with the highest price target sitting at $5.59 per share, implying potential upside of roughly 82%.

United Capital Partners (UCPS) is also constructive on Zip shares, arguing that the market is underestimating the company’s disciplined cost management and long-term US growth opportunity.

The broker has a 12-month price target of $4.85, which implies potential upside of around 58%. If Zip continues delivering stronger earnings while successfully expanding in the US, that target may not be out of reach.

The post Why brokers think Zip shares could soar 50% or more in FY27 appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther 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.

The NEXTDC Ltd (ASX: NXT) share price is in focus after the company announced a major boost to its senior debt facilities, increasing available funding to $8.7 billion to support ongoing data centre expansion and growth.

What did NEXTDC report?

• New senior debt facilities of $2.3 billion secured, upsized from the $1.8 billion announced in May 2026
• Total available senior debt facilities increase from $6.4 billion to $8.7 billion
• Margins on new facilities broadly consistent with existing debt of similar tenor
• Proceeds to support data centre development, recent customer contract wins, and general corporate purposes

What else do investors need to know?

NEXTDC’s upsized debt reflects ongoing strong demand for its services and continued support from a broad syndicate of local and international banks. The funding builds upon recent capital raising initiatives, including a $1.5 billion Entitlement Offer, $1.7 billion Hybrid Securities Offer, and a $750 million Wholesale Notes Offer, further diversifying NEXTDC’s funding sources.

Financial close of the new facilities is expected in mid-July 2026, pending satisfaction of standard conditions. The company’s growing capital base positions it to accelerate growth following a record increase in contracted utilisation earlier this year.

What’s next for NEXTDC?

With expanded funding in place, NEXTDC is well positioned to support capital expenditure linked to recent contract wins and continued rollout of state-of-the-art data centres. The company maintains a strong focus on operational sustainability, leveraging renewable energy and efficiency, supporting further growth in Australia’s digital infrastructure market.

Investors can expect NEXTDC to continue innovating and scaling its platform to meet rising demand for secure, sustainable, and connected cloud and IT infrastructure solutions.

NEXTDC share price snapshot

Over the past 12 months, NEXTDC shares have risen 21%, outperforming the S&P/ASX 200 Index (ASX: XJO), which has risen 2% over the same period.

View Original Announcement

The post NEXTDC boosts funding with $2.3 billion senior debt facility upsize appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart 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. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.