A Look At Coles Group’s Valuation As Goldman Sachs Starts Coverage With A Neutral Rating

Simply Wall St.

Jan 23

AdvertisementCoverage initiation puts Coles Group (ASX:COL) in focus Goldman Sachs has initiated coverage on Coles Group (ASX:COL) with a Neutral rating, citing regulatory risks from federal court ...

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See our latest analysis for Coles Group. Coles Group’s 1 year total shareholder return of 12.61% and 3 year total shareholder return of 33.89% sit against weaker recent momentum, with a 90 day share price return of a 7.69% decline and a current share price of A$21.0. If regulatory headlines around supermarkets have you reassessing your options, this can be a useful moment to look beyond Coles Group and check out fast growing stocks with high insider ownership. With Coles trading at A$21.0 against a broker price target of about A$23.4 and an indicated intrinsic value gap, you have to ask: is this a genuine opportunity, or is the market already pricing in future growth? Most Popular Narrative: 4.5% Undervalued According to the most followed narrative, Coles Group’s fair value sits at A$22.0 versus the last close of A$21.0, which puts the current discount into sharper focus.  The supermarket chain Coles is the kind of “boring” business that may have been overlooked as an investment opportunity. Although it was divested from Wesfarmers in 2018, Coles’ heritage traces back to 1914, giving it over 110 years of history. According to a quick search, Coles commands approximately 30% of the Australian supermarket sector. Woolworths holds around 37%, making Coles’ share impressive considering Aldi, IGA, and other smaller retailers are left to compete over the remaining 30%. Coles is a very defensive business. If it were to fail, Australians would have much bigger concerns than the state of their share portfolios. Regardless of economic conditions, people will continue to buy food and essentials. Should the business ever face serious trouble, it would likely be considered “too large to fail” from a government perspective. Coles is an iconic brand with over 800 supermarkets and 900 liquor outlets, and it maintains an ongoing relationship with Shell-branded petrol stations through co-branded sites. Having reached near saturation in the Australian market, Coles benefits significantly from economies of scale, particularly in logistics, and holds strong bargaining power with its suppliers, a power it has, at times, been accused of exploiting. The company is focused on improving efficiency through supply chain enhancements and other cost-cutting initiatives aimed at widening its margins. Post-COVID, Coles has actively pursued growth in online grocery sales and home delivery.  Read the complete narrative. Want to see what kind of earnings profile and profit margins sit behind that A$22.0 fair value? The narrative quietly leans on steady growth, firm returns on equity, and a future profit multiple more often associated with higher growth stories. Curious how those ingredients add up to only a small discount today but still point to undervaluation in the model? Result: Fair Value of A$22.0 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, this story can change quickly if regulatory action on discounting practices hits margins, or if wage and cost pressures squeeze that A$1,079.0m net income base. Find out about the key risks to this Coles Group narrative. Another Take: Earnings Multiple Sends A Different Signal Here is where things get interesting. Coles looks 37.5% below the SWS DCF fair value at A$33.6, yet its 26x P/E is higher than both the global consumer retailing average of 17.5x and the peer average of 22x. That mix of cheap on cash flows and expensive on earnings raises a simple question: which story do you trust more? Look into how the SWS DCF model arrives at its fair value. COL Discounted Cash Flow as at Jan 2026 Build Your Own Coles Group Narrative If this view does not quite fit how you see Coles, you can stress test every assumption and shape your own story in minutes: Do it your way. A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Coles Group. Looking for more investment ideas? If you are weighing up your next move after Coles, do not stop here. Widen your search with focused stock ideas that match how you like to invest.  Spot companies the market may be overlooking by checking out these 879 undervalued stocks based on cash flows built around future cash flow potential. Consider digital assets and infrastructure by scanning these 19 cryptocurrency and blockchain stocks for businesses linked to cryptocurrency and blockchain themes. Target income-focused opportunities by reviewing these 12 dividend stocks with yields > 3% that may suit a portfolio built around regular cash returns.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"}}}