How to Gauge Value in A2 Milk and Woolworths Shares Using Simple Metrics

June 16, 2025 12:33 PM AEST | By Team Kalkine Media

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Highlights

A2 Milk (A2M) outpaces historical valuation benchmarks

Woolworths (WOW) offers above-average dividend yield

Comparative look at growth and income valuation strategies

Understanding share price valuation can feel overwhelming, but there are straightforward ways to evaluate two of the most well-known names on the ASX: A2 Milk (A2M) and Woolworths (WOW). These companies represent different investment styles — growth and income — and can be approached with equally distinct valuation tools.

What’s Behind the A2 Milk (ASX:A2M) Price Momentum?

The share price of A2 Milk has surged over 38% since the start of 2025. Founded in 2000 in New Zealand, the company has built a brand around dairy products that contain only the A2 protein type — a feature believed to be easier to digest compared to conventional A1 protein milk.

A2M primarily handles distribution and marketing, with production outsourced to partners that work with certified dairy farms across Australia. A core driver of its earnings remains its infant formula segment, manufactured by supply partner Synlait Milk in New Zealand.

One way to assess a growth-focused company like A2M is through its price-to-sales (P/S) ratio. Currently, A2M trades at 4.12x sales, above its 5-year average of 3.44x. This indicates that the market is currently valuing its revenue at a higher premium, which may be reflective of optimism around future earnings growth. Notably, A2M’s revenue has been climbing consistently over the past three years, adding context to this elevated valuation.

How Woolworths (ASX:WOW) Stands as a Defensive Giant

Woolworths, established in 1924, is one of Australia’s most dominant retail operators, with over 3,000 locations and a major footprint in both Australia and New Zealand. Alongside its well-known supermarket chain, the group also runs discount retailer Big W and commercial food distributor PFD.

Woolworths earns its place in many long-term portfolios due to its stable revenue from consumer staples. This sector tends to perform reliably, even during economic slowdowns, giving WOW its reputation as a defensive option.

For income-focused evaluation, dividend yield serves as a practical metric. Woolworths is currently offering a trailing dividend yield of around 4.47%, notably above its 5-year average of 2.92%. This suggests that the current yield may be attractive relative to its historical trend, especially for those seeking consistent income streams.

By using tailored valuation methods — price-to-sales for A2 Milk and dividend yield for Woolworths — investors can gain clearer insights into what’s driving their current market pricing and make informed decisions with context.

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