Assessing Wesfarmers (ASX:WES) Valuation After Infinity Pharmacy Group’s Priceline Administration News

Wesfarmers (ASX:WES) is back in focus after more than 50 Priceline pharmacies tied to Infinity Pharmacy Group went into administration, which has sharpened attention on execution risks in its expanding health and pharmacy division.

See our latest analysis for Wesfarmers.

The latest concerns around Infinity Pharmacy Group land at a time when Wesfarmers’ A$81.56 share price is already consolidating after a weaker 90 day share price return, even as its one year total shareholder return of 18.95 percent and three year total shareholder return of 97.17 percent underline that long term momentum remains firmly intact.

If this pharmacy wobble has you rethinking your sector mix, it could be a good moment to explore other healthcare stocks that might complement or contrast with Wesfarmers’ health exposure.

With the share price hovering just above analyst targets and long term returns still robust, has Wesfarmers quietly slipped into undervalued territory, or is the market already baking in years of future growth?

Most Popular Narrative: 1% Overvalued

With Wesfarmers closing at A$81.56 against a narrative fair value of A$80.82, the current price bakes in slightly richer expectations.

The analysts have a consensus price target of A$80.761 for Wesfarmers based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$100.0, and the most bearish reporting a price target of just A$58.0.

Read the complete narrative.

Want to see what justifies paying up for a slow and steady grower? The narrative leans on modest revenue gains, firmer margins and a premium future earnings multiple. Curious how those moving parts combine into today’s fair value call?

Result: Fair Value of $80.82 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent cost inflation and execution risks in newer ventures like health and lithium could quickly undermine today’s premium valuation narrative.

Find out about the key risks to this Wesfarmers narrative.

Build Your Own Wesfarmers Narrative

If you would rather dig into the numbers yourself and challenge this view, you can build a personalized Wesfarmers thesis in just a few minutes, Do it your way.

A great starting point for your Wesfarmers research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data 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 financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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