Woolworths (ASX:WOW) Valuation in Focus After 2025 Share Price Slide and Elevated Dividend Yield

Woolworths Group (ASX:WOW) has seen its share price fall about 13% since the start of 2025, drawing attention from investors. This drop, combined with a higher-than-usual dividend yield, is turning heads regarding the company's future direction.

See our latest analysis for Woolworths Group.

The share price slide for Woolworths Group has made waves this year, coming on the heels of a stronger-than-normal dividend yield and renewed debates over market confidence. Despite moves to maintain its lead in Australian groceries, the company’s momentum has faded in 2025. A year-to-date share price return of -14.6% adds up to a deeper 1-year total shareholder return loss of nearly 20%, reflecting growing caution among investors.

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This raises a key question for investors: is Woolworths Group now undervalued after its slide, or is the market simply factoring in slower growth ahead, leaving little room for upside?

Most Popular Narrative: 14.7% Undervalued

Looking at the most widely followed narrative, expectations for Woolworths Group’s fair value outpace the last close price. Recent downward revisions in growth forecasts have only slightly narrowed this valuation gap, maintaining an optimistic take on the company’s potential.

The ongoing investment and upgrades in Woolworths' supply chain automation and distribution centers are expected to drive significant operational efficiencies and margin improvement over the next few years. As dual running and commissioning costs roll off and new facilities like Moorebank and Auburn CFCs deliver returns, this is likely to support higher future EBIT and ROIC.

Read the complete narrative.

What’s the real reason analysts hold Woolworths Group to such a premium? The narrative’s foundation hinges on game-changing efficiency gains, revamped earnings, and daring assumptions about future profit margins and core retail momentum. The numbers behind this outlook just might surprise you.

Result: Fair Value of $30.51 (UNDERVALUED)

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

However, persistent weakness in discretionary retail or intensifying price competition could threaten Woolworths Group’s margin improvement and earnings recovery. This could potentially challenge the optimistic outlook.

Find out about the key risks to this Woolworths Group narrative.

Another View: A Look at Multiples

While fair value estimates suggest Woolworths Group is undervalued, a closer look at its price-to-earnings ratio offers a different story. The company trades at 33x earnings, which is noticeably higher than both the industry average of 17.1x and the peer group’s 23.3x. This gap signals that investors are paying a significant premium compared to rivals and what the fair ratio of 28.9x suggests the market could move toward. Is the optimism justified, or does it set up valuation risk if expectations are not met?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Woolworths Group Narrative

If you see things differently or want your own take, you can dive into the numbers and craft a unique perspective in just a few minutes. Do it your way

A great starting point for your Woolworths Group research is our analysis highlighting 3 key rewards and 3 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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