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If you are wondering whether Wesfarmers is fairly priced or starting to look stretched, its current valuation story is more nuanced than the share price alone suggests. The stock last closed at A$81.09, with returns of an 8.9% decline over 7 days, a 2.1% decline over 30 days, a 0.8% decline year to date, 13.9% over 1 year, 86.5% over 3 years, and 97.0% over 5 years. These figures may catch the eye of long term holders and new investors alike. Recent news flow around Wesfarmers has focused on its position as a major Australian retail and industrial group and how investors are weighing that scale against broader sector sentiment. This context helps frame why the share price can move even without company specific announcements in the headlines. Simply Wall St currently gives Wesfarmers a valuation score of 1 out of 6, which means only one of six valuation checks points to the shares looking undervalued. Next, we will look at how different valuation approaches arrive at that view and why there may be an even better way to think about value later in the article.

Wesfarmers scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Wesfarmers Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those back to today, so everything is expressed in today’s A$.

For Wesfarmers, the 2 Stage Free Cash Flow to Equity model starts with last twelve month free cash flow of about A$3.30b. Analysts have provided forecasts out to 2029, with Simply Wall St extending those to a full 10 year path using its own assumptions beyond the formal analyst horizon. By 2029, projected free cash flow is A$3.14b, with later years based on extrapolated estimates rather than new analyst reports.

When all these projected cash flows are discounted back and added together, the model arrives at an estimated intrinsic value of A$35.77 per share. Compared to the recent share price of A$81.09, this implies the stock is around 126.7% above the DCF estimate, which indicates a rich valuation on this model alone.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Wesfarmers may be overvalued by 126.7%. Discover 8 high quality undervalued stocks or create your own screener to find better value opportunities.WES Discounted Cash Flow as at Feb 2026

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Wesfarmers.

Story Continues

Approach 2: Wesfarmers Price vs Earnings

For a consistently profitable company, the P/E ratio is a straightforward way to think about what you are paying for each dollar of earnings, which makes it a common anchor for many investors.

What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk profile. Higher expected growth or lower perceived risk can support a higher P/E, while slower expected growth or higher risk usually argue for a lower one.

Wesfarmers currently trades on a P/E of 30.07x. That sits above the Multiline Retail industry average P/E of 19.96x and above the peer group average of 21.97x, so on simple comparisons the shares carry a clear premium.

Simply Wall St’s Fair Ratio for Wesfarmers is 30.34x. This is a proprietary estimate of what a reasonable P/E could be once you factor in elements like earnings growth, profit margins, industry, market cap and specific risks, which makes it more tailored than using broad industry or peer averages alone.

With the actual P/E of 30.07x sitting very close to the Fair Ratio of 30.34x, Wesfarmers looks priced at roughly the level this framework would suggest.

Result: ABOUT RIGHTASX:WES P/E Ratio as at Feb 2026

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Upgrade Your Decision Making: Choose your Wesfarmers Narrative

Earlier we mentioned that there is an even better way to understand valuation. This is where Narratives come in as a simple way for you to write the story you believe about Wesfarmers, link that story to specific assumptions for future revenue, earnings and margins, and see how those assumptions translate into a Fair Value you can compare with the current share price on Simply Wall St’s Community page.

A Narrative connects three pieces in one place: your view of the business, a forward forecast based on numbers you are comfortable with, and a Fair Value estimate that updates automatically as new information such as earnings, news or analyst revisions is added to the platform. This allows you to quickly see whether your story still lines up with the market price or if it might be time to rethink your stance.

For Wesfarmers, one investor might align with the higher Fair Value around A$100.0, based on expectations for stronger revenue growth, higher margins and a higher future P/E multiple. Another might lean toward the lower Fair Value near A$60.17, using more cautious growth and P/E assumptions. Narratives simply make those different views visible and comparable so you can decide which story, and which Fair Value versus price gap, best reflects your own judgment.

For Wesfarmers, here are previews of two leading Wesfarmers narratives:

🐂 Wesfarmers Bull Case

Fair Value: A$100.00

Gap to Fair Value: 18.9% below this narrative fair value based on the last close of A$81.09

Revenue Growth Assumption: 6.25%

Assumes Wesfarmers can use AI, digital supply chains and sustainability initiatives to lift efficiency and margins across key divisions. Builds in revenue growth supported by Australian urbanisation, household formation and expansion in areas like health and lithium. Requires comfort with a higher future P/E multiple and the idea that capital discipline and earnings quality can support a richer valuation.

🐻 Wesfarmers Bear Case

Fair Value: A$60.17

Gap to Fair Value: 34.6% above this narrative fair value based on the last close of A$81.09

Revenue Growth Assumption: 4.01%

Flags risks from digital disruption, higher wages and sustainability spending that could pressure margins and require ongoing investment. Highlights reliance on Bunnings and Kmart or Target, along with global competition, as potential constraints on long term growth resilience. Assumes a lower future P/E multiple and higher required returns, which pull the fair value closer to the lower end of analyst targets.

Do you think there's more to the story for Wesfarmers? Head over to our Community to see what others are saying!ASX:WES 1-Year Stock Price Chart

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 WES.AX.

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