Are Judo Capital shares a buy, sell or hold after their results this week?

Shares in Judo Capital Holdings Ltd (ASX: JDO) got a nice little bump from the company’s strong first-half profits released this week, but have subsequently given back all of the gains.

With a longer-term view in mind, we’ve canvassed the opinions of three brokers on where the shares could go from here, and the consensus is that the company is undervalued at current prices.

More on that later. First off, what did the company report this week?

Profits surging

Judo said in its statement to the ASX this week that net profit had come in at $59.9 million, up 32 per cent on the prior half and up 46% compared with the same period the previous year.

The junior bank said it had delivered “above system growth” with gross loans and advances of $13.4 billion, up 7% over the half and 15% year on year, driven, the company said, by its, “differentiated customer value proposition and improved productivity”.

Judo also reaffirmed its guidance for full year, pre-tax profits of $180-$190 million.

Chief executive officer Christopher Bayliss said regarding the result:

Today’s result demonstrates that Judo continues to successfully execute against its clear and simple strategy. 2026 is a significant milestone for Judo, marking our 10th year as Australia’s first specialist SME business bank. Over this time, not only have we validated the strong demand for a differentiated, relationship-based approach to SME lending, we have demonstrated the agility of our model and our team’s ability to successfully execute our strategy. Following major investment in Judo’s systems and people, we have built the bank we dreamed of and are now scaling our business and progressing towards our goal of delivering a sector-leading return on equity.

Mr Bayliss added the bank was continuing to expand into regional and agribusiness lending.

Shares looking undervalued

Among the brokers, Morgan Stanley has the most bullish share price target for Judo, at $2.20 per share, compared with $1.80 on Wednesday.

The Morgan Stanley team said good volume growth, an upgrade to margin guidance and evidence of increased operating leverage provided more confidence in Judo’s 2-year earnings outlook.

Meanwhile at Morgans they have a price target of $2.09 on Judo shares, but added there could be some serious upside further down the track.

They added:

Judo does not intend paying dividends as it retains capital to support its significant loan growth aspirations. As such, investors in Judo are entirely reliant on capital growth to achieve their total return objective. While Judo is higher risk than major banks given it is a challenger operating entirely in the SME business banking space, we expect capital appreciation will be driven by stellar earnings growth across FY26-27 in particular. By the end of this decade we think Judo may be worth close to $3/share.

And finally, the team at Macquarie has a price target of $2.05 per share for Judo.

They said the company was executing well and delivering on growth, and they have an outperform rating on the shares.

Judo was valued at $2.12 billion at the close of trade on Tuesday.

The post Are Judo Capital shares a buy, sell or hold after their results this week? appeared first on The Motley Fool Australia.

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