Coles Group (ASX:COL) just released its latest full-year results, and there's plenty for investors to consider. Revenue and sales increased, which shows that the supermarket giant is still finding ways to grow its top line. However, net income and earnings per share edged down compared to last year. Alongside these results, Coles announced a fully franked final dividend of A$0.32 per share, which could appeal to income-oriented investors evaluating their next steps.

This news follows a year in which Coles Group’s stock delivered a strong performance, climbing 31% over the past year and achieving a 26% gain so far this year. Shares also rallied 15% over the past month, suggesting growing momentum since results began to come in. While the company’s long-term return profile has been steady, the dip in net income despite higher sales introduces a new angle for those considering valuation in the supermarket sector.

With the latest results now available and Coles Group maintaining its dividend, investors may be considering whether this presents an opportunity or if the market has already priced in the company’s growth prospects.

Most Popular Narrative: 8% Overvalued

The prevailing narrative, according to Robbo, is that Coles (ASX: COL) is currently trading above its estimated fair value, even though its fundamentals may appear robust when viewed in isolation. The stock looks steady, but the narrative points out that investors could be paying a premium for its defensive qualities.

Despite its defensive characteristics, strong brand moat, and stable earnings, Coles appears relatively inexpensive as an investment. Its forward PE ratio is around 21 times, and it offers a dividend yield of approximately 4%. While this might seem expensive for a small pharmaceutical company or a gold miner, for a business controlling 30% of Australia’s non-discretionary spending on food and essential goods, it seems quite reasonable.

What is the secret behind Robbo’s calculation that puts Coles beyond its fair value? There is a blend of cautious optimism here, driven by the company’s long-term defensive power and a critical view of its growth runway. Interested in what key assumptions might tip the balance in Coles’ valuation? There are industry comparisons, margin forecasts, and more behind these numbers. Find out what could move the needle.

Result: Fair Value of $22.00 (OVERVALUED)

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

However, regulatory shifts or rising competition could undermine Coles’ defensive appeal. These factors may pose unexpected challenges for its growth outlook and valuation.

Story Continues

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

Another View: What Does the DCF Model Say?

Taking a different approach, our SWS DCF model comes to a contrasting result and indicates Coles might actually be trading below what it’s truly worth. Does this fundamentally change the investment case, or does it add more complexity?

Look into how the SWS DCF model arrives at its fair value.COL Discounted Cash Flow as at Sep 2025

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Coles Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Coles Group Narrative

If this perspective doesn't quite align with your own, or you’d rather dive into the data yourself, you can easily build your own narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Coles Group.

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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.

Companies discussed in this article include COL.AX.

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