Is Wesfarmers’ High ROE and Global Anko Push Broadening Its Earnings Base (ASX:WES)?

• Wesfarmers recently highlighted a high 31.2% return on equity, while Kmart’s Anko brand and Wesfarmers Health accelerated their international and healthcare expansion plans across markets including Canada, the US, the Philippines and the Priceline network.
• This combination of strong capital efficiency and diversified growth initiatives in retail and healthcare points to an increasingly broader earnings foundation for the group.
• We’ll now examine how Wesfarmers’ strong return on equity reshapes its existing investment narrative around cost control, growth and risk.

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Wesfarmers Investment Narrative Recap

To own Wesfarmers, you need to believe it can keep turning solid retail brands and selective growth bets into attractive returns on capital. The latest 31.2% ROE print and acceleration of Anko and Health expansion support this thesis, but they do not materially change the near term focus on defending margins against cost inflation or the execution risk in newer healthcare and lithium investments.

The most directly relevant recent development is Wesfarmers Health’s push to expand the Priceline network alongside broader healthcare investments, which now sit beside the Anko rollout as key growth platforms. Together with recent earnings growth to A$2,926.0 million on A$45,700.0 million of revenue, these moves reinforce how management is trying to broaden profit drivers beyond the traditional Australian and New Zealand retail base.

Yet while growth looks broader, investors should also be aware of execution risk in newer divisions like Health and Covalent lithium, where...

Read the full narrative on Wesfarmers (it's free!)

Wesfarmers' narrative projects A$51.6 billion revenue and A$3.5 billion earnings by 2028. This requires 4.1% yearly revenue growth and about A$0.6 billion earnings increase from A$2.9 billion today.

Uncover how Wesfarmers' forecasts yield a A$80.82 fair value, in line with its current price.

Exploring Other Perspectives

Nine members of the Simply Wall St Community value Wesfarmers between about A$44 and A$100 per share, showing how far opinions can stretch. Against that backdrop, concerns about cost inflation and margin pressure invite you to weigh several different views on how resilient Wesfarmers’ earnings could be over time.

Explore 9 other fair value estimates on Wesfarmers - why the stock might be worth as much as 23% more than the current price!

Build Your Own Wesfarmers Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• 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.
• Our free Wesfarmers research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Wesfarmers' overall financial health at a glance.

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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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