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Why the Woolworths share price rose 6% in November

Sebastian Bowen
Woolworths share price

The Woolworths Group Ltd (ASX: WOW) share price has had another solid month of gains to report to shareholders. WOW shares started November off at $37.32 but by the time December kicked off on the markets this week, Woolworths shares were up to $39.76 – a monthly gain of 6.54%.

Seeing as the S&P/ASX200 (INDEXASX: XJO) only banked a 3% rise for the same period, it’s an unquestionably good result for our nation’s biggest supermarket chain.

Woolworths shareholders have had an exceptionally rewarding run in recent years. Although WOW shares fell substantially between 2014 and 2016, since then the stock is up almost 100% (a gain of over 100% if dividends were included), going on today’s levels.

Why did Woolworths raise the roof in November?

The strange thing is that Woolworths didn’t have a great month from a PR point of view. Right off the bat, the company had to deal with a wage underpayments scandal, which made news across the country. But the fact that Woolworths had underpaid what is estimated to be close to $300 million for nearly 6,000 staff didn’t seem to bother investors too much.

In other news, Woolworths did release its quarterly update just before the start of November, in which it reported a 7.1% increase in sales – helped along by its wildly successful Lion King toys promotional campaign.

Also assisting sentiment was an update that the Federal Court has given the green light for Woolworths’ plans to legally restructure its Endeavour Drinks business. Woolworths plans to eventually spin off Endeavour in a move that’s generally well-supported by shareholders.

It seems that the strong numbers coming out of Woolies and its Endeavour plans moving forward were enough to keep the company’s positive momentum moving forward last month.

Are Woolworths shares a buy today?

Although I think there’s a lot to like about Woolworths as a business, its price tag today is a touch too expensive in my opinion. The stock currently trades at a price-to-earnings multiple around 34, which I can’t see being justified by Woolies’ current growth rates. I would personally prefer to wait for a better buying opportunity with this one.

The post Why the Woolworths share price rose 6% in November appeared first on Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019