Up 40% this year, Macquarie says this ASX 200 stock can still return double digits from here

Global testing giant ALS Ltd (ASX: ALQ) delivered a solid set of first-half results this week, and brokers, including Macquarie, have a positive outlook on the company’s shares, which give exposure to increasing confidence in the minerals exploration sector.

The company this week reported a 13.3% increase in underlying revenue to $1.7 billion, while first-half net profit of $141.7 million was up 11.8%.

ALS chair Nigel Garrard said it was a solid result.

The group has delivered a strong first half result with organic revenue growth recorded across all business streams, resilient margins, and both underlying earnings and profit considerably up.

The company also boosted its interim dividend by about 3% to 19.4 cents per share.

Commodities sector strong

Managing director Malcom Deane said, despite “ongoing geopolitical and macro uncertainty”, there was strength in the company’s commodities division, while there was lower growth in the life sciences division.

Within commodities, the businesses delivered a strong performance, achieving 14.3% organic revenue growth supported by favourable market conditions. Growth was recorded across all regions. Within minerals, activity continues to be led by major and mid-tier miners, while improving funding conditions for junior explorers are contributing to higher quotation and early-stage project activity.

Mr Deane said the life sciences division’s performance was slightly below expectations despite a strong showing from the food sector.

ALS said it was also continuing to assess a number of merger and acquisition opportunities.

The company upgraded its revenue guidance to 6% to 8% growth, up from 5% to 7%, and said it was well on track to meet its FY27 targets, including growing revenue to $3.3 billion and growing underlying EBIT to $600 million.

Share price upside

The team at Macquarie ran the ruler over the results and said investors who were seeking leverage to the strong gold price by buying ALS would have liked what they saw.

The broker has an outperform rating on ALS shares and said, despite the strong performance already, there was more upside to be had.

Stock has had a strong run and multiple not cheap, but should be supported by ALS’s strong earnings per share growth profile which is above both market & global … peers. Calendar year 26 exploration budgets should trend positively and there’s potential for the juniors to co-join the senior-driven exploration recovery.

Macquarie has a 12-month price target of $22.85 on the shares, compared with Tuesday’s close of $21.12.

This price target was up from a previous target of $19.26. Bell Potter is even more bullish on the shares, with a price target of $25.   

The post Up 40% this year, Macquarie says this ASX 200 stock can still return double digits from here appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• Bell Potter just upgraded its view on this ASX 200 stock
• ALS reports higher revenue, profit, and dividend for H1 FY26

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.