The S&P/ASX 200 Index (ASX: XJO) has endured a flat year in 2026, and has been outpaced by many international markets.
Australia’s benchmark index has been weighed down by high interest rates, inflation and fears around global conflict.
These have hit sectors like finance/banking, which represent a strong portion of the ASX 200.
Despite the disappointing performance, this has created value opportunities for quality companies.
One such ASX 200 stock firmly in my sights is SGH Ltd (ASX: SGH).
Company overview
SGH is a diversified industrial and investment group, with interests in heavy-equipment sales, service and equipment hire, media and broadcasting, oil and gas, and developable property.
The ASX 200 company has seen its share price fall more than 20% year to date.
Despite this, the underlying fundamentals look relatively strong.
In its full-year results released in August, the company reported a net profit of $689.2 million, up 31.8%, even as revenue slipped 1.4% to $10.59 billion.
Revenue was broadly in line with the prior year. Underlying NPAT of $920 million and underlying EPS of $2.26 were broadly flat. Statutory NPAT of $655 million was up 35%.
SGH MD & CEO Ryan Stokes, said:
FY26 was a year of disciplined delivery in variable market conditions. We grew earnings in line with guidance, expanded margin again, and converted 99% of EBITDA to cash. That result is a credit to our people across every business, and their commitment to serving our customers and running our operations well every day.
Morgans sees upside for this ASX 200 stock
Recent share price weakness has now pushed this ASX 200 stock firmly into value territory.
In a recent note from Morgan’s, the broker slightly lowered its price target but maintained a positive long-term view on the company.Â
Following the FY26 results season we have reviewed our forecast assumptions for SGH’s 30% share in BPT, flowing through the lower earnings detailed in our FY26 BPT results note (Link). With our sum-of-the-parts (SOTP) valuation tied to our BPT price target and the Crux valuation, an NPV of future cashflows, our SGH valuation declines modestly to $48/sh (previously $50/sh), whilst retaining our BUY recommendation.
Based on this target, Morgans anticipates up to 30% growth for this ASX 200 stock.
This expectation is consistent with other brokers.
Based on 12 analyst targets via TradingView, the average 12 month target is $48.71.
The post Why this ASX 200 stock is a compelling buy with 30% upside appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.