Why Macquarie shares could be a ‘quality cyclical at a discounted price’: expert

ASX 200 bank shares strengthened on Wednesday, outperforming the benchmark S&P/ASX 200 Index (ASX: XJO).

The Index closed 0.52% lower today while the ASX 200 Banks Index (ASX: XBK) finished 1.03% in the green.

The Macquarie Group Ltd (ASX: MQG) share price followed the trend, closing up 0.58% at $169.66.

The investment bank has posted a series of gains and losses these past 12 months but is currently trading down 17% this year to date, as illustrated below.

Macquarie looks attractive at current prices

The investment debate on ASX bank shares has been a contentious one in 2022. On the one hand, rising interest rates look to boost bank profits.

On the other, the industry is heavily tied to the mortgage sector, with higher interest rates increasing the risk of systemic default.

However, one expert likes what Macquarie shares have to offer. Equity strategist at Wilsons Rob Crookston said Macquarie now presents an “opportunity to buy a quality cyclical at a discounted price”.

He wrote on Livewire:

MQG is a quality business with the proven ability to position itself to take advantage of structural growth opportunities, resulting in compound earnings growth over the long-term.

Management’s ability to deploy capital into opportunities has the potential to underpin future years of growth. We think investors will continue to support this approach, given MQG’s track record.

Crookston said Macquarie can sustainably grow earnings given its focus on annuity income, its capital light model, and exposure to alternative investment classes.

He said that Macquarie manages 153 infrastructure assets across the world across all infrastructure asset classes. These range from roads to airports to digital infrastructure.

Macquarie’s current valuation is also attractive, he says, trading at a price-to-earnings ratio (P/E) of 13.6 times. This is “lower than it has been trading on post-2020 and close to its 5-year historical average”, according to Crookston.

“We think this valuation looks reasonable due to the strong long-term earnings growth potential for MQG and unique leverage to the energy transition.”

The post Why Macquarie shares could be a ‘quality cyclical at a discounted price’: expert appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 bank shares responding positively to higher interest rates?
• How did the Macquarie share price perform in June?
• How did the Vanguard Australian Shares Index ETF perform in June?
• 3 more of Morgans’ best ASX share ideas for July
• June was a terrible month for ASX 200 bank shares. Here’s why

Motley Fool contributor Zach Bristow 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 recommended Macquarie Group Limited. 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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