Stock of the day: Endeavour Group

(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.