Wesfarmers Ltd (ASX: WES) shares have come back a fair way from their highs.
The shares are trading around $73.79 on Thursday, compared with a 52-week high of $94.70.
Could they recover and make their way to $100 in 2027? Let's run the numbers and find out.
I think $100 is possible, but it looks unlikely to me over that timeframe.
From $73.79, Wesfarmers shares would need to rise around 36% to reach $100.
The business itself remains one I rate. Wesfarmers owns Bunnings, Kmart, Officeworks, and several other businesses, giving it multiple ways to grow earnings over time.
But the current forecasts suggest that growth will be steady.
According to CommSec, consensus estimates point to earnings per share of $2.72 in FY27, rising to $2.90 in FY28 and $3.11 in FY29.
If Wesfarmers reached $100, the shares would be trading on a P/E ratio of around 34 times forecast FY28 earnings and 32 times FY29 earnings.
That would be a demanding valuation, even for a business of Wesfarmers' quality.
Wesfarmers has commanded a premium valuation for some time, so a high P/E ratio would not be unusual.
Its average annual P/E ratios over the past five years, according to CommSec, have ranged from around 22 times to 32 times earnings.
That helps put a $100 share price into perspective.
Wesfarmers could trade above its historical averages for a period, if investors become more optimistic about earnings growth.
But to not want to base my expectations on the market pushing the valuation higher while earnings are growing at a relatively measured pace.
That would require a gain of around 22% from today's price and would still leave the shares below their 52-week high.
At $90, Wesfarmers would trade at around 31 times forecast FY28 earnings and 29 times FY29 earnings.
Those multiples are still high, but they sit much more within the range investors have been willing to pay for Wesfarmers shares in recent years.
If Bunnings and Kmart continue to perform well and group earnings keep rising, I could see the market becoming more positive on the shares again.
Wesfarmers should also continue returning cash to shareholders while investors wait.
Consensus forecasts point to fully-franked dividends of $2.34 per share in FY27, $2.49 per share in FY28, and $2.71 per share in FY29.
At today's price, the FY27 forecast represents a dividend yield of around 3.2%.
I would not be counting on Wesfarmers shares reaching $100 in 2027.
The business is still one to happily own, but $100 would require both a strong share price recovery and a valuation towards the expensive end of its recent history.
Around $90 looks more realistic to me. If Wesfarmers keeps earnings and its businesses perform well, a return towards that level is achievable.