WES : Wesfarmers

 WES wesfarmers

30/6/26

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Over the last five years, Wesfarmers (ASX:WES) has maintained exceptional financial health, characterized by steady profit growth, strong return on equity (ROE), and robust market performance. The company’s Return on Equity (ROE) has consistently hovered between (30%) and (36%), significantly outperforming industry averages.

5-Year Financial & Operational Highlights

• Profit Growth: Net profit after tax (NPAT) has grown consistently. The company reported full-year NPAT of ($2.93) billion in FY 2025 and an even stronger 1H FY 2026 net income of ($1.60) billion (a (9.3%) increase on the prior corresponding period). [1, 2, 3, 4, 5]

• Return on Equity (ROE): Driven by disciplined capital allocation across its diverse retail and industrial portfolio, WES recorded an impressive ROE of approximately (30%) in FY 2024 and expanded further to a range of (33%) to (36%) over the trailing twelve months. [1, 2, 3, 4]
• Debt & Leverage: The company’s debt-to-equity ratio has averaged around (128%) to (131%). While this indicates a leveraged balance sheet, it is typical for mature conglomerates. Wesfarmers has successfully managed this with stable operating cash flows and strong interest coverage. 

• Dividends: A reliable income generator. Slowly growing over the last 6 years. WES shares have maintained strong, fully-franked distributions, with a 5-year average dividend yield near (3.4%). 

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Over the last 10 years, Wesfarmers Limited (ASX: WES) has traded at a 10-year median P/E ratio of 29.84x, with its valuation experiencing a notable expansion. As of July 2026, the stock trades at a trailing P/E ratio of roughly 32.3x to 33.3x. [1, 2, 3]

Historical P/E Ratio Data (10-Year Trend)

The table below tracks the approximate price-to-earnings ratios over the last decade, primarily captured at the close of Wesfarmers' fiscal year (30 June) or calendar year ends. [1, 2, 3, 4]

Year / Period	Approximate P/E Ratio	Key Valuation Context
Current (Jul 2026)	32.3x – 33.3x	Driven by robust 1H26 earnings and EPS outperformance.
2025	33.4x – 34.8x	Multi-year high due to strong retail momentum from Bunnings and Kmart.
2024	28.4x – 29.2x	Expansion from valuation lows as earnings normalized.
2023	22.4x – 28.9x	Moderate valuation compression amidst rising macro interest rates.
2022	20.9x – 22.7x	A 5-year cyclical low point during the broader market tech and retail correction.
2021	31.4x	Boosted by the pandemic-induced home improvement and retail boom.
2020	20.2x	Market uncertainty combined with structural adjustments post-Coles demerger.
2019	28.2x	Adjusted structural baseline following the spinoff of Coles Group.
2018	~16.5x	Skewed down due to significant write-downs on Target and the UK Bunnings exit.
2017	~21.0x	Solid retail performance balanced by initial UK expansion headwinds.
2016	-8.14x to ~18.5x	Distorted heavily by multibillion-dollar non-cash impairments on Target and coal assets.

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Evaluate Essential Key Metrics

10-Year Ranges:
• Minimum: 6.62x (distorted by anomalies/non-recurring items).
• Median: 29.84x.
• Maximum: 89.47x (short-term spikes during major asset restructures/demergers). [1]
Historical Mean: The overall 10-year rolling mean rests at 30.81x. [1]
Industry Comparison: Wesfarmers currently trades significantly above the cyclical retail industry median of ~17.78x, commanding a premium due to its blue-chip defensive moat and strong return on equity (ROE) exceeding 30%. [1, 2]

Identify the Structural Distortions

When assessing Wesfarmers' long-term history, keep in mind that statutory earnings were heavily disrupted by major corporate restructures. The 2018 demerger of Coles Group and various material writedowns (such as the failed Bunnings UK expansion and Target restructures) created temporary spikes or drops in the statutory P/E ratio that did not always reflect ongoing operational performance.

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Over the past 10 years, Wesfarmers (ASX:WES) has consistently maintained a Return on Invested Capital (ROIC) that comfortably exceeds its Weighted Average Cost of Capital (WACC), demonstrating strong and enduring value creation. Wesfarmers' current ROIC hovers around 13% to 14.8%, while its current WACC sits near 8% to 10% (tracking somewhat above its 10-year historical median of roughly 7.1%). [1, 2, 3]

Value Creation and Spread

Positive Spread: Wesfarmers sustains a positive economic spread (ROIC minus WACC > 0) year after year. [1]
Capital Efficiency: Operating star performers like Bunnings, Kmart, and Officeworks allows the firm to consistently turn a higher operating profit relative to its total pool of debt and equity than it costs to raise that capital. [1, 2, 3]
Historical Context: Over the decade, WACC remained depressed during the broader low-interest-rate environment of the late 2010s/early 2020s (closer to 6%–7%), while ROIC remained buoyant, widening the value-creation gap. As macro discount rates and bond yields rose through the mid-2020s, WACC expanded toward ~9.6%–9.9%, but ROIC has remained high enough to continuously clear the hurdle rate. [1, 2]

Metric Overview

ROIC Range (Trailing/Recent): ~13.1% – 14.8%
WACC Range (Current/Recent): ~8.0% – 10.0%
10-Year WACC Median: ~7.1%
Economic Verdict: Value-accretive; returns reliably outpace financing costs

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EBITDA

Wesfarmers Limited (ASX:WES) EBITDA expressed as a percentage of revenue (EBITDA margin) has historically hovered between 7.5% and 14% over the last 10 years, heavily influenced by the major demerger of Coles Group in 2018. [1]

Historical EBITDA Margin Trend

Fiscal Year	EBITDA Margin (%)	Key Drivers & Events
FY25	13.63%	Strong performance from Bunnings and Kmart.
FY24	13.08%	Supply chain optimization and retail volume growth.
FY23	12.75%	Post-pandemic retail recovery and inflation management.
FY22	11.45%	Pandemic supply chain disruptions and rising operating costs.
FY21	12.40%	Surging DIY (Bunnings) demand during COVID-19 lockdowns.
FY20	11.90%	Implementation of AASB 16 lease accounting standard adjustments.
FY19	10.15%	First full year operating post-Coles demerger.
FY18	7.60%	Low-margin supermarket operations (Coles) included pre-demerger.
FY17	7.80%	Consolidated retail portfolio including massive grocery revenue lines.
FY16	7.45%	Restructuring and write-downs related to UK Target/Homebase ventures.

Note: Ratios before FY20 do not reflect the AASB 16 lease standard amendments which universally increased reported corporate EBITDA margins by shifting lease expenses into depreciation and interest. [1]

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