Key Points: 

  • 3-star Endeavour Group (EDV) is the most attractively valued consumer staple under Morningstar coverage.
  • Endeavour's business is divided into two segments: Its retail segment, an omnichannel liquor retailer, and its hotels segment, which provides hospitality services and gambling operations.
  • Endeavour has a wide economic moat in its core liquor retailing segment due to a scale-based cost advantage. Endeavour's hotels business also benefits from intangible assets that support economic profit generation for the segment.

See how Endeavour compares to supermarket giants Coles and Woolworths.

Transcript: 


Johannes Faul: When we're talking about the consumer staples stocks that we cover at Morningstar, Endeavor is the most attractively valued one at the moment from investor standpoint.

It also has a wide economic moat, which is rare within Morningstar's coverage universe, which means they have very strong competitive advantages and they are the largest liquor retailer in Australia. And it can fractionalise or unitise their fixed cost base over a large sales base, that's the main driver.

Brands they have or chains they have think about Dan Murphy's or BWS, those are the two main retailing brands which they distribute (alcohols) through.

They've benefited during the lockdowns, during the pandemic and going forward they should continue to grow at a long term average growth rate that they have historically in the mid-single-digit range and we expect them to be a steadily growing EPS with fairly little volatility earnings and low uncertainty to that, which also means investors should need a lower margin of safety for investing in this name.

So it is an attractively priced stock at the moment, its most attractively priced stock in our consumer staples universe.