Tag: Motley Fool

The Mineral Resources Ltd (ASX: MIN) share price is having a subdued finish to the week.

In morning trade, the mining and mining services company’s shares are down 2.5% to $92.00.

Why is the Mineral Resources share price under pressure?

The weakness in the Mineral Resources share price on Friday appears to have been driven by a broker note out of Goldman Sachs.

That note reveals that the broker believes the company’s shares have peaked for the time being.

According to the note, Goldman has downgraded the company’s shares to a neutral rating with a reduced price target of $87.00.

This implies potential downside of almost 6% from current levels.

Why did Goldman downgrade Mineral Resources?

While Goldman was a touch underwhelmed with the company’s quarterly update, the main reason for the downgrade was its valuation following some strong gains in recent months. This can be seen on the chart below.

In respect to its quarterly performance, the broker said:

MIN reported a mixed Dec Q with better than expected iron ore and lithium spodumene pricing, but lower than expected iron ore and lithium sales volumes and Li hydroxide pricing at Wodgina. Guidance for FY23 is unchanged except for Mt Marion spodumene which has been downgraded slightly on the back of a slight delay to the expansion project (600ktpa to 900ktpa) ramp-up to July.

As for its valuation, its analysts highlight that the Mineral Resources share price had rallied a massive 58% since they put a buy rating on it. This has taken it to 1.2x net asset value, which is beyond what they believe is a fair valuation. Goldman adds:

With our updated estimates and PT we downgrade MIN to Neutral (from Buy) […] Since upgrading MIN to a BUY on 11 April 2022, the stock is up ~58% vs. the ASX200 roughly flat (-0.2%) over the same period.

The post Mineral Resources share price falls on Goldman Sachs downgrade appeared first on The Motley Fool Australia.

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More reading

• Invested $1,000 in Mineral Resources shares 10 years ago? Here’s how much passive income you’ve made
• 5 things to watch on the ASX 200 on Friday
• Why Best & Less, Evolution, Mineral Resources, and St Barbara shares are dropping
• Mineral Resources share price tumbles as lithium business takes off
• Guess which four ASX 200 lithium shares charged higher today

Motley Fool contributor James Mickleboro 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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Flight Centre Travel Group Ltd (ASX: FLT) shares have been on a rollercoaster since the start of the COVID-19 pandemic. At first there was a crash, then a slow but steady rise. However, since the start of May 2022, the Flight Centre share price has actually gone through a 30% decline.

The ASX travel share has been telling investors about a recovery in demand, which logically should mean higher profit. But, how much profit is being projected?

Recovery of demand

At the company’s annual general meeting (AGM), the business said that there are some supply challenges – such as airline capacity – early in FY23. However, Flight Centre said those challenges don’t appear to be impacting customer demand. The leadership noted that the market generally grows year over year.

In June 2022, various businesses were tracking at near or pre-COVID total transaction value (TTV) levels on a monthly basis as a result of “both the rapid demand uplift after borders reopened and higher than normal airfare prices”.

Flight Centre also said that demand is increasing in both leisure and corporate travel. The revenue margin was “holding steady” year over year, “and expected to increase as market conditions normalise and as new initiatives gain transactions”.

On top of that, Flight Centre also noted that its cost margin is tracking at 10%, a level that it historically aspired to.

Its corporate business reported that September and October were the two strongest TTV months in its 30-year history in corporate travel. Management also said that it’s seeing positive trends in the leisure sector, though Australian short-term resident departures in August 2022 were at 63% of August 2019.

Flight Centre managing director Graham Turner said:

Travel is, however, at a relatively early stage on the path to recovery… and there is considerable pent-up demand that is not yet fully translating to bookings, which means there is also ongoing upside potential.

In business travel, for example, our recovery is being driven by very high customer retention rates and large volumes of new account wins – rather than by overall client activity returning to pre-COVID levels.

It’s expecting FY23 first-half underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $70 million and $90 million, up from a loss of $184 million in the prior corresponding period.

Profit projections for Flight Centre shares

Looking at earnings per share (EPS) is one of the best ways to see profitability, in my opinion.

It puts the net profit in per-share terms and gives context to the share price. I don’t think there’s much point to growing net profit if it’s not boosting the underlying value of each share. Growing EPS is one of the key factors that can help grow the Flight Centre share price in the future.

According to Commsec, the business could generate 31.4 cents of EPS in FY23. This would put the Flight Centre share price at 50x FY23’s estimated earnings.

That may seem like a very high price/earnings (p/e) ratio. But, it’s still in the recovery phase. I think it’s worth pointing out that earnings are expected to more than triple to $1.035 in FY24. That would equate to it being valued at 15x FY24’s estimated earnings.

Of the analyst ratings that Commsec has collated on Flight Centre, there are three buys, two sells and eight holds.

The post How much profit could Flight Centre shares make in 2023? appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• Is 2023 Flight Centre’s year to return to profit?
• The Flight Centre share price has made a flying start to 2023! Should I buy?
• Here are the 10 most shorted ASX shares
• Could ASX 200 travel shares be set for a major boost in 2023?

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 recommended Flight Centre Travel Group. 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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The Fortescue Metals Group Limited (ASX: FMG) share price is ending the week strongly.

In morning trade, the mining giant’s shares are up 3.5% to a 52-week high of $23.25.

Why is the Fortescue share price rising?

Investors have been bidding the Fortescue share price higher today following the release of the miner’s second quarter and first half production update.

According to the release, for the three months ended 31 December, Fortescue delivered iron ore shipments of 49.4 million tonnes. This underpinned a 4% increase in half year shipments to a record of 96.9 million tonnes.

This was achieved with a second quarter C1 cost of US$17.17 per wet metric tonne (wmt). While this was up 12% year over year, it was a 3% improvement on the US$17.69 per wmt that it reported during the first quarter.

Fortescue commanded an average of US$86.93 per dry metric tonne (dmt) for the quarter, which equates to a discount of 88% to the average benchmark 62% fines iron ore price for the period.

While no earnings data was provided, Fortescue revealed that its cash balance increased US$700 million during the quarter to US$4 billion.

Management commentary

Fortescue’s Executive Chairman, Dr Andrew Forrest AO, commented:

The Fortescue team delivered our highest ever December quarterly shipments of 49.4 million tonnes, our best ever half year, grew the mineral and green energy business globally, strengthened our balance sheet, kept costs low, all while maintaining our excellent safety performance.

We are now nearing the 200 million tonne annualised rate in our iron ore business even before we commission Iron Bridge. Our Company has never performed better on the mining, exploration, green hydrogen and green energy development front, while leading the world as the first heavy industry company to achieve real zero with a fully costed plan.

Demand for Fortescue’s suite of iron ore products remains strong and our entry into the higher grade segment of the market has been well received, with significant interest in the Iron Bridge magnetite concentrate.

FY 2023 guidance

Pleasingly, there has been no change to Fortescue’s guidance for the full year. It continues to target iron ore shipments of 187 million tonnes to 192 million tonnes with a C1 cost of US$18 to US$18.75 per wmt.

Capital expenditure excluding Fortescue Future Industries (FFI) is expected to be US$2.7 billion to US$3.1 billion. Whereas FFI’s anticipated expenditure comprises US$500 million to US$600 million of operating expenditure and US$230 million of capital expenditure.

The post Fortescue share price hits 52-week high on record half appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• How much profit could Fortescue shares make in 2023?
• ASX passive income: My game plan to reach $30,000 per year
• Why a merger between Fortescue and this major-league miner could make sense: expert
• Why Fortescue shares could be facing a Meta-like problem

Motley Fool contributor James Mickleboro 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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The Origin Energy Ltd (ASX: ORG) share price is on course to end the week on a positive note.

In morning trade, the energy giant’s shares are up 2.5% to $7.51.

Why is the Origin share price pushing higher?

Investors have been bidding the Origin share price higher this morning following the release of a guidance update.

According to the release, for FY 2023, Origin now expects Energy Markets underlying EBITDA to be between $600 million and $730 million. This is up from $500 million to $650 million and excludes the potential impact of the introduction of the legislated coal price cap.

Origin notes that the improvement in Energy Markets earnings has been driven by an expected increase in natural gas and electricity gross profit due to a good operating and trading performance, as well as improved coal delivery under legacy contracts.

It also highlights that no material impact is expected on FY 2023 Energy Markets earnings as a result of the introduction of the $12/GJ cap on uncontracted gas. This is because gas supplies for the year had been almost entirely contracted prior to the cap coming into effect.

In addition, as mentioned above, this guidance excludes the potential impact of any compensation Origin may receive to recover coal costs that exceed the legislated coal price cap of $125/tonne, or further coal supply contracts that may be executed at the capped price.

LNG update

Another positive that could be boosting the Origin share price today is the performance of the LNG trading business. Management notes that it has improved following additional hedging at favourable market prices, resulting in a further $140 million to $180 million of LNG trading EBITDA.

Previously, the company was expecting LNG trading EBITDA for FY 2023 and FY 2024 to be slightly positive. However, it is now expected to be $40 million to $80 million.

Things will be even better in FY 2025, with LNG trading EBITDA now expected to be $450 million to $650 million across FY 2025 and FY 2026. This compares to previous guidance of $350 million to $450 million.

Though, it warns that this outlook remains subject to market prices on unhedged volumes, operational performance, and delivery risk of physical cargoes, and shipping and regasification costs.

Origin is currently a $9.00 per share takeover target for consortium comprising Brookfield Asset Management and MidOcean Energy.

The post Origin share price higher on earnings guidance upgrade appeared first on The Motley Fool Australia.

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More reading

• Why Baby Bunting, Origin, Rio Tinto, and South32 shares are dropping today
• Buy ‘underappreciated’ Origin Energy shares for 20% upside: Morgan Stanley
• How are ASX 200 energy shares tracking in the first week of trade?
• The 3 best performing ASX 200 dividend shares of 2022

Motley Fool contributor James Mickleboro 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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If you’re looking for dividends to boost your income this year, then you may want to look at the two ASX 200 dividend shares listed below.

Both of these dividend shares have been rated as buys and tipped to provide investors with good yields in the near term. Here’s what you need to know about these shares:

Deterra Royalties Ltd (ASX: DRR)

The first ASX 200 dividend share for income investors to look at is Deterra Royalties.

It is the owner of a portfolio of royalty assets across a range of commodities, primarily focused on bulks, base and battery metals. This includes the massive Mining Area C (MAC) iron ore operation owned by mining giant BHP Group Ltd (ASX: BHP).

The team at Citi is positive on the company and has a buy rating and $5.10 price target on its shares.

As for dividends, the broker is forecasting fully franked dividends per share of 30 cents in both FY 2023 and FY 2024. Based on the current Deterra Royalties share price of $4.88, this will mean yields of 6.15%.

Macquarie Group Ltd (ASX: MQG)

Another ASX 200 dividend share for income investors to consider is investment bank Macquarie.

It has been tipped as a buy by analysts at Morgans. The broker notes that the investment bank is a “quality franchise, well exposed to structural growth areas, and the company is managing a more difficult FY23 environment well.”

In respect to dividends, Morgans is forecasting partially franked dividends of $7.05 per share in FY 2023 and $7.36 per share in FY 2024. Based on the current Macquarie share price of $185.13, this will mean yields of 3.8% and 4%, respectively.

Morgans has an add rating and $214.30 price target on the company’s shares.

The post Buy Macquarie and this ASX 200 dividend share: analysts appeared first on The Motley Fool Australia.

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More reading

• Forget gold! ASX 200 blue-chip shares could be the new safe-haven asset
• These ASX dividend shares have been tipped as buys by analysts
• Did you buy $1,000 of Macquarie shares 10 years ago? If so, here’s how much dividend income you’ve earned
• Earn passive income with these ASX 200 dividend shares – experts
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor James Mickleboro 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 Macquarie Group. 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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Are you looking for dividend shares to buy this week? If you are, then the two named below could be worth checking out.

Both have been named as buys by Goldman Sachs and tipped to provide investors with attractive yields. Here’s what you need to know about them:

National Australia Bank Ltd (ASX: NAB)

The first ASX dividend share to look at is NAB. Goldman Sachs is very positive on this big four bank and currently has a buy rating and $35.60 price target on its shares.

Goldman Sachs likes NAB due to its exposure to commercial lending, which the broker believes will perform relatively better than home lending in the current environment. Its analysts “see volume momentum over the next 12 months as favouring commercial volumes over housing volumes and NAB provides the best exposure to this thematic.”

In respect to dividends, Goldman is forecasting fully franked dividends of $1.66 per share in FY 2023 and $1.73 per share in FY 2024. Based on the current NAB share price of $31.48, this implies yields of 5.3% and 5.5%, respectively.

Universal Store Holdings Ltd (ASX: UNI)

Another ASX dividend share that has been tipped as a buy is Universal Store. Goldman Sachs currently has a buy rating and $7.55 price target on its shares.

It is a growing retailer focused on youth fashion through the Universal Store and Thrills brands.

Goldman Sachs is a fan of the company due to the company’s exposure to younger consumers, which it expects to continue spending in 2023 thanks to minimum wage increases and their lower exposure to rising interest rates.

In addition, the broker sees “an opportunity for ongoing store roll-out for UNI which is the market leader in youth multi-brand apparel.”

As for dividends, the broker is expecting fully franked dividends of 27.2 cents in FY 2023 and 29.9 cents in FY 2024. Based on the latest Universal Store share price of $5.80, this equates to yields of 4.7% and 5.15%, respectively.

The post Goldman Sachs names 2 ASX dividend shares to buy now appeared first on The Motley Fool Australia.

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More reading

• Analysts say these growing ASX dividend shares are buys right now
• Top brokers name 3 ASX shares to buy today
• Which ASX dividend shares I’d buy now to target $50,000 of annual passive income
• Can income investors bank on a 6% dividend yield from NAB shares?
• ASX income stocks: A once-in-a-decade chance to get rich?

Motley Fool contributor James Mickleboro 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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Small cap ASX shares have the potential to deliver big returns because they are starting from an earlier point in their journey compared to an established blue chip share. But how do you know which small cap company will go on to greater heights?

One fund manager has picked out Gentrack Group Ltd (ASX: GTK) shares as a major opportunity.

The ASX tech share is a software provider for utility businesses and airports around the world. It helps clients with efficiency and to deliver their customers better services. It’s also helping utilities ‘transform’ in this ‘sustainable era’ to meet customer demand for how they purchase and consume energy and water. Gentrack says that “it is not a case of if utilities transform to meet these demands, but when”.

Below is a snapshot of Gentrack’s share price history.

The NAOS Asset Management investment team believes Gentrack shares offer considerable upside, saying it has a high level of conviction in the business as a core investment over the next three to five years. They give two main reasons.

Industry tailwinds for the small cap ASX share

NAOS said the first reason to be positive is the “significant” industry tailwind of all meter points globally transitioning to new IT systems.

According to NAOS, this represents an opportunity worth more than $1 billion across around 200 utility companies.

The fund manager noted that Gentrack has been able to secure new tier 1 and tier 2 customers and successfully implement their systems in a seamless manner, which was described as a “key risk” for any IT migration.

Gentrack share price valuation

NOAS says the small cap ASX share’s valuation is also “extremely attractive”.

The fund manager pointed out that Gentrack’s customers operate in a highly regulated environment and are therefore “rather sticky clients”.

NAOS analysts think the business generates excellent cash flow and has good cash conversion. It was noted that all of Gentrack’s research and development is expensed (rather than spreading out the cost over multiple years, which is what a lot of other ASX tech shares do by capitalising those costs).

The fund manager pointed out that while Gentrack largely operates in three international markets, the small cap ASX share is now executing on a global expansion strategy. This was illustrated by the recent signing of a large utility company in Singapore. NAOS is particularly pleased by this foray because many ASX tech shares only operate within Australia and New Zealand.

The fund manager revealed how much future upside there might be with the Gentrack share price:

If management forecasts are to prove correct and in FY25 GTK produces $175 million of revenue and an EBITDA margin of 17%, then cash EBITDA for GTK would be ~$30 million. Of note would be the net cash position of the business which could reach close to $50 million. Using Objective Corporation Limited (ASX: OCL) as a comparative software business, which has similar attributes albeit a higher level of recurring revenue, OCL trades on 29 times EV/EBITDA. Even if you apply a 30% discount this would result in a valuation of $6.42 / share for GTK based on FY25 targets, which we see as particularly compelling given Gentrack’s current share price.

The post This obscure small cap ASX share is ‘extremely attractive’: expert appeared first on The Motley Fool Australia.

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More reading

• Goldman Sachs names 2 ASX dividend shares to buy now
• 3 things that could super-charge your investment returns over the long term: Scott Phillips
• Why I think Woolworths shares aren’t worth the worry
• What could propel Telstra shares over the next year?
• Invested $1,000 in Mineral Resources shares 10 years ago? Here’s how much passive income you’ve made

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 positions in and has recommended Objective. 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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Most people would probably say they’d like to achieve the best investment returns they can to grow their wealth. In this article, we’re going to look at three of the most useful tips.

There are a number of different factors which impact how much wealth someone is able to build. How much someone earns from their job/business can play an important factor. How much they save and invest of that earned income is another factor. Generating good investment returns can also play its part.

Let me show you how much difference it can make.

Using a compound interest calculator, we’ll compare two scenarios over a 30-year time period, starting at $0 and investing $1,000. In one scenario we’ll look at the portfolio earning a return of 9% a year and the other will make 10% a year.

For the 10% figure, it grows to $1.97 million. For the 9% figure, it achieves $1.64 million. In other words, that 1% a year ended up being a lost opportunity cost of more than $300,000!

The Motley Fool’s Scott Phillips went on NABTrade’s podcast to discuss the sorts of things that people can do to accelerate their wealth and for their investments to be as effective as possible.

Utilise tax-efficient vehicles

Phillips acknowledged that it can be difficult to choose the right structure but that there is a whole industry of professionals who are experts at helping people identify what’s best for them.

He said the right structure can provide opportunities for people if they know what they’re doing.

Phillips pointed out that the tax effectiveness of superannuation is “through the roof”. He did say that some people may have money outside of super “and they probably should”, admitting some of his own investing is done outside of superannuation.

The 15% tax rate of superannuation during the accumulation phase and 0% at retirement (depending on individual circumstances) is “stupidly generous”. He proposed that the amount of tax saved could add more than good stock picking.

Phillips also noted that family trusts and companies could be beneficial, but said that’s for other experts who know more about that side of things to provide the detail. He said that being able to split income with a lower-tax partner could make a big difference.

Basically, he was pointing out that saving on tax could make a big difference to the end result of investment returns. However, Phillips said that investors shouldn’t make an investment just because of the tax implications. It’s the after-tax return that is the important number.

Even so, it’s worth thinking about at the beginning of an investment plan because it can make big difference over time.

Benefit from franking credits

The Motley Fool expert also brought up the tax imputation credits called franking credits. This is a refundable tax credit that is attached to dividends paid by Australian companies. It aims to ensure that company profits are not taxed twice before reaching shareholders’ bank accounts.

He noted that Australian companies that pay dividends enable investors to achieve stronger after-tax returns.

For investors with a low (or 0%) tax rate, franking credits boost the dividend return that investors receive, once they have completed their tax return.

Telstra Group Ltd (ASX: TLS) shares are an example of an investment that pays fully franked dividends.

Lower fees

Phillips also said that fees can play a big part in long-term returns. We often see ads comparing super funds showing how much higher fees can hurt a super balance over time. Phillips referenced a statistic that showed someone’s superannuation balance could be 30% to 40% higher if they choose the lower-cost fund option.

The investment expert also noted that online brokers have significantly brought down the cost of each transaction for investors. This is a “huge benefit”, he said.

Whatever their investment choices, if people trade too frequently it could mean “paying too much” in fees and losing some of their investment returns.

However, he pointed out that he isn’t anti-fees. If someone will earn a massive return for him, he’s happy to pay a bit more or even a lot more.

Phillips said “the after-fee returns are what we should care about…it makes sense to reduce those fees as much” as we physically can.

Foolish takeaway

By utilising these tips, investors may be able to boost their wealth quite significantly over the long term.

As I showed at the start of this article, the difference over time could amount to hundreds of thousands of dollars.

The post 3 things that could super-charge your investment returns over the long term: Scott Phillips appeared first on The Motley Fool Australia.

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More reading

• What could propel Telstra shares over the next year?
• Does Telstra sell bonds to ASX retail investors?
• Telstra shares: ‘Some healthy options that are underappreciated’
• ‘Fierce competitor’: Expert names 2 big brand ASX shares ready to take off in 2023
• How much profit could Telstra shares make in 2023?

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 positions in and has recommended Telstra Group. 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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Woolworths Group Ltd (ASX: WOW) shares are a popular blue-chip investment on the ASX, beloved by many. As Australia’s largest grocer and supermarket operator, Woolies is one of the best-known businesses and brands in the country.

It is undoubtedly a quality business. It has a strong and mature earnings base, domination of its industry, and a long-standing dividend policy.

But I’m not wild about Woolies shares right now. And I would certainly not want the worry of Woolworths in my share portfolio at present.

Charlie Munger, the right-hand man of legendary investor Warren Buffett, once said that “no matter how wonderful a business is, it’s not worth an infinite price”.

This is essentially my problem with Woolworths shares today. As we’ve already established, Woolworths is a wonderful business in my opinion. But it is also one that is not growing at a very fast rate.

Its latest full-year earnings (covering FY2022) revealed group sales rose 9.2% over FY2022 to $60.85 billion. But earnings before interest and tax (EBIT) dropped by 2.7% to $2.69 billion, while net profit after tax (NPAT) rose 0.7% to $1.51 billion.

This is understandable. After decades of expansion, Woolies is basically at saturation point. There are only so many groceries Australians are going to buy each year, no matter how much advertising the company does. And Woolworths is arguably at the point where adding more stores will not generate more sales.

That’s all fine. The company is still very profitable and is able to return a large slice of those profits back to shareholders each year.

My problem with Woolworths is its valuation.

Are you getting your Woolies’ worth with Woolworths shares?

At present, the company is trading on a price-to-earnings (P/E) ratio of 27.62. This means that investors are being asked to pay $27.62 for every $1 of earnings Woolworths makes. In my view, that is expensive. Very expensive:

To illustrate, let’s compare this P/E ratio to those of Woolies’ rivals. Coles Group Ltd (ASX: COL) currently trades on a P/E ratio of 21.8. IGA-operator Metcash Limited (ASX: MTS) has a P/E of 16.58 at present.

Woolworths looks even more expensive compared to ASX retail shares outside the supermarket space. Harvey Norman Holdings Limited (ASX: HVN) shares are presently on a P/E ratio of just 6.93. JB Hi-Fi Ltd (ASX: JBH) is sitting just above that on 10.08.

These businesses operate in a very different environment to Woolies. But still, this difference is a veritable ocean.

You can even buy shares of US-listed tech giants like Apple Inc (NASDAQ: AAPL) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) on a lower P/E ratio than Woolworths today. Netflix Inc (NASDAQ: NFLX) is only just ahead of Woolies.

And those companies clearly have (at least in my view) far longer growth runways in front of them than Woolworths.

This goes a long way in explaining why the current dividend yield of Woolworths shares is so low compared to shares like Coles or Metcash.

So long story short, Woolworths is far too expensive for me to consider as an investment today. The company is of top-notch quality, to be sure. But it would have to fall by quite a lot for me to consider adding it to my portfolio.

The post Why I think Woolworths shares aren’t worth the worry appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Harvey Norman, and Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended Coles Group and Harvey Norman. The Motley Fool Australia has recommended Alphabet, Apple, Jb Hi-Fi, Metcash, and Netflix. 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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Telstra Group Ltd (ASX: TLS) shares could go higher in 2023 if the company is able to unlock hidden value within the business.

There are a number of different parts to the business, including its mobile segment, NBN earnings, Telstra Health, the acquired Digicel Pacific, and so on.

While some areas are seen as core parts of the business, Telstra has been selling off some of the assets it doesn’t see as integral.

Expert upgrades rating

According to reporting by The Australian, the broker Macquarie has recently upgraded its rating on Telstra to outperform, up from neutral. The target price was increased 13% to $4.50. This implies that Telstra shares could rise by 10% over the next year.

What was the cause of the upgrade to the rating?

Macquarie said (according to The Australian):

Telstra is trading largely in line with our measures of fair value.

However, we believe the monetisation of Telstra’s FibreCo will be a catalyst for the stock in the next 6-12 months.

In addition, we expect a positive result in February 2023 as subscriber numbers are likely to be a positive surprise to consensus.

While Telstra generates a lot of its earnings from its mobile segment, the company is working on other infrastructure as well. In the company’s annual general meeting (AGM), it outlined some of its projects:

Our inter-city fibre project announced in February will provide ultra-fast connectivity between capital cities and improved regional connectivity. We have finalised contract negotiations for the first stages of the build and we have held detailed discussions with customers including signing up Microsoft as a major anchor tenant.

In satellites, Telstra will build and manage the ground infrastructure and fibre network in Australia for Viasat’s new series 3 satellite system and construct a major fibre project to build state-of-the-art inter-city dual fibre paths across the country. We also announced an MOU [memorandum of understanding] with LEOSat provider OneWeb and are working towards building a commercial relationship with testing of their network underway.

In terms of mobile subscribers, in FY22 the business added 155,000 net retail postpaid mobile services including 121,000 branded ones. Retail prepaid unique users were up 215,000. Telstra may also be benefiting from subscribers moving from Optus after the cyber hack of the business.

Telstra share price valuation

Looking at the current estimates on Commsec, Telstra is projected to generate earnings per share (EPS) of 16.5 cents per share. This would put the Telstra share price at 24 times FY23’s estimated earnings.

The post What could propel Telstra shares over the next year? appeared first on The Motley Fool Australia.

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More reading

• Does Telstra sell bonds to ASX retail investors?
• Telstra shares: ‘Some healthy options that are underappreciated’
• ‘Fierce competitor’: Expert names 2 big brand ASX shares ready to take off in 2023
• How much profit could Telstra shares make in 2023?
• Telstra share price is ‘undervalued’ right now: broker

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 positions in and has recommended Microsoft. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Macquarie Group. 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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