Stock of the day: Endeavour Group
Endeavour Group reported modest growth in hotel sales for Q1 2025, while retail liquor sales stayed flat, reflecting changing consumer trends impacting profitability.
(AI video summary)
This video was created on 11 November for IG audiences by ausbiz.
ASX code: EDV
Understanding Endeavour Group's performance
Endeavour Group, a major player in the liquor and hotel industry, reported a 0.5% sales increase for the first quarter (Q1) 2025, driven by its hotel business, while retail sales were flat. The company expects an operating earnings margin between 7% and 7.5% for the first half (H1) of 2025, down from 8% last year. This has led to a 5% drop in stock value, reflecting market disappointment as consumers shift towards more affordable liquor options.
Investment opportunities in consumer staples
Despite the downturn, Endeavour Group presents opportunities for income investors, with its stock at a 12-month low. The forward price-to-earnings ratio is now 20, indicating potential undervaluation.
However, growth investors might consider other options given the current low-growth environment. Alternatives like GrainCorp, which is expected to report strong volumes, could present better growth prospects. Endeavour's dividend yield of 4.7% fully franked remains attractive for income-focused portfolios, though caution is advised due to market volatility.
Long-term prospects and trends
Endeavour Group's extensive Australian network supports long-term stability. Despite challenges, its resilience in the consumer staples sector is significant. Australians' preference for hotel visits and alcohol purchases suggests ongoing demand.
Investors should monitor Endeavour's performance, considering its income potential and the broader economic context. Staying informed on consumer behaviour and economic indicators is crucial for investment decisions.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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