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Highlights
- STO shares have dipped significantly in early 2025
- WES remains near its 52-week high
- Key financial metrics show contrasting strengths
Two of Australia's prominent listed companies—Santos (STO) and Wesfarmers (WES)—are drawing investor attention in 2025, but for very different reasons. One has experienced a notable price dip, while the other remains close to its peak. Understanding the value in each requires looking beyond recent share price performance to examine fundamentals and long-term potential.
Santos (ASX:STO): Energy Sector Dynamics and Challenges
Santos is one of Australia’s leading oil and gas producers, with a history that dates back to the 1950s. The company owns and operates a wide range of energy assets, including gas fields and pipeline infrastructure. While its operations remain substantial, environmental and regulatory scrutiny have intensified in recent years. The company has pledged to reach net-zero Scope 1 and 2 emissions by 2040, though Scope 3 emissions—generated by the end use of its products—are not currently included in that target.
As of early 2025, the Santos share price has dropped around 17.0%. This has brought valuation metrics into sharper focus. Its debt-to-equity ratio stood at 43.0% in calendar year 2024, indicating a conservative capital structure. Over the past five years, Santos has maintained an average dividend yield of 4.6%, providing consistent income returns. However, its return on equity (ROE) came in at 8.2% in 2024—somewhat below the double-digit benchmark typically expected from a mature energy company.
Wesfarmers (ASX:WES): A Diversified Business with Strong Financials
Wesfarmers, with roots going back to 1914, is a diversified conglomerate with significant holdings in retail, industrials, and chemicals across Australia and New Zealand. Well-known brands such as Bunnings, Kmart, and Priceline Pharmacy fall under its umbrella. Notably, Bunnings alone contributes over half of Wesfarmers’ operating profit.
In contrast to Santos, the Wesfarmers share price is trading just 6.6% below its 52-week high. Financially, the company is more leveraged, with a debt-to-equity ratio of 131.4% in FY24. Nevertheless, it has delivered a strong ROE of 30.3% in the same period, reflecting efficient use of capital. Since 2019, Wesfarmers has also maintained an average dividend yield of 3.4%.
While both companies operate in vastly different sectors—energy and diversified retail—their fundamentals reveal contrasting investment characteristics. Santos offers a higher yield and lower debt, but faces pressure on returns and environmental targets. Wesfarmers demonstrates stronger profitability, despite a higher debt load. For those evaluating long-term value, these differences provide key insights into the potential risk and reward each company may offer moving forward.
