Woolworths Holdings (JSE: WHL) emerges as an attractive prospect for investors adopting a traditional, profit-centric strategy. Despite the tech-driven investment landscape, the company’s consistent profitability positions it as a reliable choice for shareholders.
Over the past three years, Woolworths Holdings exhibited impressive earnings per share (EPS) growth, with the last year witnessing a 14.13% gain, reaching R4.28. The stability in earnings is supported by a 10.56% revenue growth to R72.27 billion while maintaining EBIT margins. Notably, insider ownership’s significant capital involvement, with holdings worth R365 million, aligns their interests with broader shareholders, indicating confidence in the company’s strategy.
Recent developments, such as the proposed acquisition of a 93.45% stake in Absolute Pets, further underscore Woolworths Holdings’ strategic expansion into high-potential markets, positioning it as an end-to-end pet care destination.
Technical Analysis
The daily chart shows that Woolworths, currently trading at R72.40, exhibits signs of recovery as bulls challenge recent bearish trends. The price action hovers around the 50.00% Fibonacci retracement level, showing potential resilience and a possible level of interest. Trading above the 20-SMA (green line) and 50-SMA (blue line) but below the 100-SMA (red line) indicates a neutral stance. The recent intersection of the 20-SMA above the 50-SMA, coupled with the 100-SMA breaking above both, suggests potential bullish momentum.
The long-term rising RSI at 60.81 and increasing RSI-based MA at 57.56 support this outlook. Short-term trading opportunities could exist towards the resistance level at the 61.80% Fibonacci retracement level (golden ratio) of R74.14, should the bulls sustain a push above the 100-SMA. A break above the golden ratio could confirm the bullish momentum, likely bringing the R77.43 and R80.30 resistance levels into play.
Conversely, a failure to sustain a push higher could offer short-term trading opportunities towards the initial support at R69.94. A break below the R69.94 price level would likely bring the R67.97 and R64.12 support levels within the bears’ reach in the short term.
Summary
Woolworths Holdings (JSE: WHL) presents an intriguing trading opportunity backed by consistent EPS growth and strategic acquisitions. The technical analysis suggests a potential bullish momentum should the R74.14 resistance level be breached.
However, a sustained break below the 50% Fibonacci retracement and the R69.94 support could initiate a run to lower levels.
Sources: TradingView, Trading Economics, Office for National Statistics, Reuters, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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