The S&P/ASX 50 index is home to 50 of the largest listed companies on the Australian share market.
This means the index hosts many of the highest quality and most well-known companies that the ANZ region has to offer.
While not all of the shares on the index are necessarily in the buy zone, two that could be are listed below. Here’s what you need to know about them:
Ramsay Health Care Limited (ASX: RHC)
Ramsay Health Care is an ASX 50 share which could be worth considering. Although 2020 was a difficult year for the private hospital operator because of the pandemic, Ramsay appears to be over the worst of it now and positioned for growth over the long term.
In fact, analysts at Goldman Sachs believe Ramsay can grow its operating earnings at a compound annual growth rate of 7% between FY 2021 and FY 2024.
As a result, they believe its shares are great value at the current level. So much so, Goldman has put a conviction buy rating and $75.00 price target on the company’s shares.
Based on the current Ramsay share price of $63.15, this implies potential upside of almost 19% over the next 12 months.
It commented: “The stock is trading at 8.7x EBITDA for a 7% EBITDA CAGR (FY21-24E), towards the bottom of its 5-year range. We believe the improvement in near-term fundamentals is still not reflected in consensus forecasts or current trading multiples. We raise our 12-month TP to $75 and reiterate our Buy (on CL).”
Xero Limited (ASX: XRO)
Another ASX 50 share to consider is Xero. It is a leading cloud-based business and accounting software provider with a focus on small to medium sized businesses.
Over the last few years Xero’s platform has evolved from an accounting solution into a full service small business solution. This has supported strong growth in customer numbers and ultimately recurring revenues.
Goldman Sachs is also a fan of Xero and believes its growth still has a long way to go. This is due to the quality of its offering, the ongoing shift to cloud-based solutions, its global market opportunity, and burgeoning app ecosystem.
The broker currently has a buy rating and $157.00 price target on the company’s shares. This compares to the current Xero share price of $109.69.
Goldman commented: “…as it broadens and monetizes its app ecosystem, and expands into new geographies, we estimate this will open a further NZ$62bn in addressable TAM, providing a multi-decade runway for strong revenue growth. Combined with attractive unit economics at maturity (GSe 40% EBIT margins), we believe the long-term earnings opportunity for Xero is material.”
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More reading
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- ASX 200 rises, Afterpay sinks, Vocus jumps
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The post 2 of the best ASX 50 shares to buy now appeared first on The Motley Fool Australia.
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