The National Australia Bank Ltd (ASX: NAB) share price continued its positive run on Wednesday and pushed higher again.
The banking giant’s shares are now up 18% from the 52-week low they dropped to in March.
Is it too late to invest?
While NAB is not my number one pick, I still believe its shares would be great options at the current level.
Times may be hard for the bank right now, but the cycle will eventually change and a return to better days will come. I feel this could make it worth being patient and buying its shares with a long term view.
I’m not alone in labelling NAB a buy.
Who else likes NAB?
Earlier this week analysts at Goldman Sachs reiterated their conviction buy rating and $17.50 price target on the bank’s shares.
With its shares currently changing hands at $15.60, this price target implies potential upside of greater than 12% over the next 12 months excluding dividends.
But if you include the fully franked dividends of $1.05 per share Goldman Sachs expects NAB to pay in FY 2021, this potential return stretches to almost 19%.
Why does Goldman Sachs like NAB?
The broker likes NAB due to the dramatic improvement in its operational performance in recent years. This has particularly been the case with how it manages the volume versus margin trade-off.
In addition to this, it expects NAB’s revenue momentum over the medium term to remain superior to its peers. This is expected to be driven by its overweight exposure to SME lending, which Goldman Sachs views as both a relative volume and margin tailwind versus housing.
Another reason it is positive on NAB is its costs focus. This has seen NAB deliver flat expense growth in FY 2019 and FY 2020 excluding notable items.
All these positives are expected to combine and drive the strongest pre-provision operating profit (PPOP) growth among its peers. Which, considering its 15% PPOP multiple discount to peers, Goldman Sachs feels NAB is the standout pick in the sector.
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More reading
- Why the Commonwealth Bank share price is the best buy among the Big 4 banks
- Are ASX bank shares worth buying despite dividend cuts?
- Is it time to buy ASX banks?
- The ASX big bank stock most likely to outperform in the COVID-19 recovery
- 5 ASX 200 dividend shares for an economic recovery
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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