Author: openjargon

The Commonwealth Bank of Australia (ASX: CBA) share price shook off bearish overvaluation concerns to charge higher again in May.

Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed out April trading for $114.54 apiece. When the closing bell rang on 31 May, those same shares were swapping hands for $119.54, up 4.4%.

That saw the CBA share price race ahead of the ASX 200, with the benchmark index gaining a more modest 0.5% in May.

Here’s what happened in the month just past.

CBA share price hits new record highs

ASX 200 investors who paid heed to bearish analysts cautioning that Australia’s biggest bank is trading at an unjustifiably high premium to its peers and sold their holding will have missed out on the record high share price.

On 16 May, the CBA share price gained 1.9% to close at $122.26, marking a new all-time closing high.

The big four bank looks to have caught some tailwinds from the federal budget. With a number of cost-of-living relief measures packed in, the budget could ease the outlook for non-performing loans over the year ahead.

Investors’ primary focus this month was CBA’s quarterly update for the three months ending 31 March.

Although the CBA share price closed down 2.2% on the day, the ASX 200 bank stock made up for those losses, and a good bit more, over the following five trading days.

Investors initially favoured their sell buttons after CommBank reported a 1% decline in operating income and a 2% increase in operating expenses.

This, in turn, saw a 5% fall in the bank’s unaudited statutory net profit after tax (NPAT), which came in at $2.4 billion for the quarter. Although NPAT still came in slightly ahead of consensus expectations.

And investors will have noted CBA’s very solid Common Equity Tier 1 (CET1) ratio of 11.9%, which is safely above the minimal 10.25% ratio stipulated by the Australian Prudential Regulation Authority (APRA).

Also likely helping buoy the CBA share price over the following days was the relative resilience of the bank’s net interest margins (NIMs), which should help support profits.

And longer term, the bank remains a favourite with passive income investors for its reliable fully franked dividends. While the rising share price has seen CBA’s dividend yield dip to 3.8%, CommSec forecasts the dividend payouts will continue to tick higher over the next two years.

CBA is also engaged in a billion-dollar share buyback, which has been helping support the share price.

The post How the CBA share price defied the bears to surge in May appeared first on The Motley Fool Australia.

More reading

• Here’s the average wealth of Aussies who manage their own superannuation
• Buying ASX 200 bank stocks? Here’s why they could keep outperforming
• Why the CBA share price is predicted to ‘fall substantially’: broker
• Do Macquarie shares pay a decent ASX dividend?
• One ASX stock to buy and one to sell

Motley Fool contributor Bernd Struben 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.

With so many shares to choose from on the Australian share market, it can be difficult to decide which ones to buy. The good news is that brokers across the country are doing a lot of the hard work for you.

Three top ASX shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Brickworks Limited (ASX: BKW)

According to a note out of Bell Potter, its analysts have upgraded this building products company’s shares to a buy rating with an improved price target of $29.50. The broker made the move on the belief that there is an attractive look-through opportunity with Brickworks relating to its investment in Washington H Soul Pattinson & Company Ltd (ASX: SOL). It notes that its mark to market valuation of Soul Patts is indicating that the stock is currently trading at a 3.6% discount to pre-tax NTA. In addition, with the broker positive on Brickworks’ rental growth outlook, it feels now is the time to buy and has upgraded its shares. The Brickworks share price is trading at $26.28 on Monday.

Champion Iron Ltd (ASX: CIA)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating and $9.30 price target on this iron ore miner’s shares. This follows the release of the Canada-based miner’s FY 2024 results last week. Goldman highlights that Champion Iron reported record EBITDA of C$553 million, which was up 11% year on year and comfortably ahead of the market’s expectations. The good news is that more records are expected to be broken next year. Goldman notes that with Bloom Lake operating above nameplate and management ramping up Phase II, its analysts are expecting this to support 50%+ EBITDA growth in FY 2025. The Champion Iron share price is fetching $7.14 this afternoon.

Xero Ltd (ASX: XRO)

Analysts at Macquarie have retained their outperform rating and $180.70 price target on this cloud accounting platform provider’s shares. This follows news that Xero is lifting prices and updating plans in the United Kingdom in September. Macquarie was pleased with the changes, which mirror those undertaken in the Australia market recently. It believes the new plans will support a higher average revenue per user metric in the UK market through the simplification of its offering and increased bundling. The Xero share price is trading at $134.24 at the time of writing.

The post Leading brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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• Forget Fortescue and buy this ASX mining stock now
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Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Goldman Sachs Group, Macquarie Group, Washington H. Soul Pattinson and Company Limited, and Xero. The Motley Fool Australia has positions in and has recommended Brickworks, Macquarie Group, Washington H. Soul Pattinson and Company Limited, and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Many Australians woke up to some happy news today – they would be getting a pay rise, and a hefty one at that. This news could have some significant impacts on ASX shares.

Yes, this morning, the Fair Work Commission announced that both award wages and the minimum wage would increase by 3.75% from 1 July this year.

This decision will affect up to 2.6 million Australians, or 20.7% of the country’s entire workforce, who are employed on award wages.

This decision will be welcomed by these workers, as it delivers a rise in wages that comes in just above the rate of inflation over the year. Inflation came in at 3.6% over the 12 months to 30 April 2024. So if price rises keep to this rate or fall even further, workers are in line for a real rise in living standards.

Here’s some of what the Fair Work Commission said on its decision:

Modern award minimum wages remain, in real terms, lower than they were five years ago, notwithstanding last year’s increase of 5.75 per cent, and employee households reliant on award wages are undergoing financial stress as a result.

This has militated against this Review resulting in any further reduction in real award wage rates. At the same time, we consider that it is not appropriate at this time to increase award wages by any amount significantly above the inflation rate, principally because labour productivity is no higher than it was four years ago and productivity growth has only recently returned to positive territory.

So good news for any Australian worker on an award wage today.

But how will this decision impact ASX shares and the Australian share market?

How does a minimum wage hike impact ASX shares?

Well, on one level, it will be a definite positive. More money in workers’ pockets means more money is available to spend in the economy. The fact that the rise comes in just above the rate of inflation means that this decision should have a stimulatory effect on consumer spending.

That should bode well for almost all sectors of the share market. But especially so for companies that sell goods and services that consumers tend to buy more of as their disposable income rises. That would include most ASX shares in the consumer discretionary sector, but perhaps also those in the consumer staples, healthcare, communications, industrial, financial, tech, utility and real estate sectors.

However, another factor we must consider is the impact that any broad rise in wages might have on inflation and, thus, on interest rates. As any attuned investor would know, the markets are particularly sensitive to interest rates right now. April’s inflation numbers ended up coming in higher than most commentators expected, dashing hopes of an imminent cut in interest rates.

In fact, some experts stated that these inflation numbers increased the likelihood that the Reserve Bank of Australia’s next move will be a rate hike.

From this lens, an above-inflation wage hike might not be the best news, as it arguably has the potential to add fuel to the inflation fire by increasing consumer spending at the wrong time.

Fortunately, one ASX expert doesn’t think this is a realistic scenario.

ASX expert: Inflation will keep falling

As reported in The Australian today, JPMorgan economist Tom Kennedy reckons that today’s decision won’t “move the needle on the Bank’s inflation/wage forecast or change its thinking on current monetary policy settings”.

Kennedy is predicting that the hike to award wages “will be neutral for aggregate wage growth, with a contribution very close to zero”. As such, JPMorgan is still pencilling in at least one RBA interest rate cut from early 2025.

No doubt this rosy outlook will come as music to ASX investors’ ears. Perhaps investors have already taken it to heart, judging by today’s healthy 0.76% rise for the S&P/ASX 200 Index (ASX: XJO) at present. But we’ll have to wait and see what happens.

The post What a pay rise for 2.6 million Aussies could mean for ASX shares appeared first on The Motley Fool Australia.

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• These were the best performing ASX 200 shares in May 2024
• If you were born in the 1970s or later, your superannuation is delivering the best returns

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen 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 JPMorgan Chase. 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.

Some might argue the frenzy on ASX artificial intelligence (AI) stocks has well and truly begun.

Since NVIDIA Corporation’s (NASDAQ: NVDA) epic financial results last month and similar impressive returns for other companies in the AI space, experts are constructive on the outlook for ASX AI stocks.

But it’s always wise to tread with caution. More thought is needed than to simply ‘ride the AI wave’.

If you’re hunting for an ASX AI stock with significant growth potential, I think Life360 Inc (ASX: 360) is one to consider closely.

Life360 shares have surged 105% this year to date and climbed from a 52-week low of $6.71 per share in December last year to today’s price of $15.34 at the time of writing.

Here’s why I think it is well-positioned for future growth.

Why Life360 is a top ASX AI stock

Life360’s core product is a smartphone app for location sharing. This app has become a reliable way for families to track children, frail individuals, and those with special medical needs.

The ASX AI stock’s recent financial performance has been sound, in my view. For instance, company revenues were up 15% year over year and increased to US$78.2 million in Q1 CY2024. Life360 also grew operating cash flow to US$10.7 million, an improvement of nearly $20 million from last year.

Broker Morgan Stanley has expressed its bullish sentiments on Life360. It cited the company’s extensive data collection as a potential AI advantage in a recent note.

Through its “huge volumes of user data,” Life360 has unique insights into what customers do with their time and money. Because of this, it sees “significant potential” for the company in the AI scene.

Solaris Investment Management also likes the growth outlook for the ASX AI stock. Talking to The Australian Financial Review, chief investment officer Michael Bell said the company had been a “very, very strong performer”, and that “importantly, [its] revenue has been growing”.

“Life360 [has] 66 million subscribers, and [it has] been growing aggressively over the last eight years”, he added, echoing Morgan Stanley’s statements.

Bright future prospects

Life360 also has the ability to enter new markets, a point highlighted by Bell Potter in a recent note. The company’s launch of ‘Driver Protect’, a subscription-based roadside assistance service, is a prime example of this, the broker says.

This new product is just one example of how the company has the “potential to leverage its large and growing user base to enter new markets and disrupt the legacy incumbents.”

Bell Potter labels potential future markets for the ASX AI stock as insurance, home security, and identity theft protection, to name a few. If they prove correct, I believe these opportunities could significantly boost the company’s growth trajectory.

The firm has a buy rating and a price target of $ 17.75 for Life360. This represents a potential upside of nearly 15% from the time of publication.

ASX AI stock Foolish takeaway

In my opinion, Life360 stands out as a top ASX AI stock well positioned to capitalise on Al-related tailwinds. It is looking to expand into new markets and boasts a substantial user base. This data can be used in specialty ways going forward.

While analysts are also constructive on the stock, it’s essential to remember the risks involved with investing and that past performance is no guarantee of future results.

The post I think this is the best ASX artificial intelligence (AI) stock to buy right now appeared first on The Motley Fool Australia.

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• ‘Significant potential’: One unexpected ASX 200 AI share to buy now

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 positions in and has recommended Life360. 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.

The S&P/ASX 200 Index (ASX: XJO) is having a strong start to the week. In afternoon trade, the benchmark index is up 0.8% to 7,761.1 points.

Four ASX shares that are rising more than most today are listed below. Here’s why they are storming higher:

APM Human Services International Ltd (ASX: APM)

The APM Human Services International share price is up 10% to $1.37. Investors have been buying the human services company’s shares after it accepted a takeover offer. According to the release, APM has entered into a scheme implementation deed with Madison Dearborn Partners. Under the scheme, APM shareholders will receive $1.45 cash per share. The APM Independent Board Committee unanimously recommends that shareholders vote in favour of the scheme. This is in the absence of a superior proposal and subject to the independent expert’s report.

Fletcher Building Ltd (ASX: FBU)

The Fletcher Building share price is up almost 4% to $2.95. This morning, this building materials company announced amendments to its banking agreements which will extend the tenor of its debt facilities. In addition, the amendments will allow Fletcher Building to rely on more favourable terms for covenant testing through to the end of calendar 2025 if required. The company’s acting CEO, Nick Traber, said: “Given the current market environment and outlook, we have taken pre-emptive steps to reinforce the Company’s resilience for the medium term to position ourselves to navigate the tougher trading conditions.”

Navigator Global Investments Ltd (ASX: NGI)

The Navigator Global Investments share price is up 13% to $2.09. Investors have been buying this investment company’s shares after it upgraded its earnings guidance for FY 2024. Full year adjusted EBITDA is now expected to be between US$85 million to US$89 million, representing an increase of between 76% and 84% on FY 2023’s adjusted EBITDA. Management advised that strong profit distributions from its partner firms is driving a significant second half earnings uplift. The company’s CEO, Stephen Darke, believes “this underscores both the resilience and earnings potential of NGI’s diversified portfolio of global alternative investment managers.”

Strike Energy Ltd (ASX: STX)

The Strike Energy share price is up 6% to 21.2 cents. The catalyst for this has been an update on the Walyering-7 (W7) well within the Perth Basin. According to the release, W7 has intersected a high-quality conventional gas accumulation to the north-east of the currently producing Walyering gas field. A total of 23m of net gas pay with an average porosity of 16% has been measured.

The post Why APM, Fletcher Building, Navigator Global, and Strike Energy shares are storming higher appeared first on The Motley Fool Australia.

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• Why Playside Studios, Pro Medicus, Strike Energy, and Winsome shares are charging higher
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Motley Fool contributor James Mickleboro 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 APM Human Services International. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Three S&P/ASX 200 Index (ASX: XJO) stocks did more than their fair share of the heavy lifting in May.

The month just past saw the ASX 200 close up 0.5% at 7,701.7 points.

But these three companies left those gains far behind.

Which companies am I talking about?

Read on.

Three ASX 200 stocks ripping higher in May

The third best performer on the Aussie benchmark index in May was Alumina Ltd (ASX: AWC), a holding company focused on alumina and bauxite production.

Shares in the ASX 200 stock closed out April trading for $1.63 and finished May at $1.91 apiece, up 16.6%.

The Alumina share price has been surging in 2024 amid fast-rising aluminium prices. Up 14% in 2024, the aluminium price gained more than 6% in May to close the month at US$2,703 per tonne.

Of course, the big news in May was the market update on the proposed takeover of Alumina Alcoa Corp (NYSE: AA), announced on 21 May.

The United States-based mining giant is looking to acquire Alumina, offering 0.02854 Alcoa shares for each Alumina share. With the Alcoa share price up 26% in May, investors were taking advantage by piling into Alumina shares.

Moving on to the second ASX 200 stock racing higher in May, which was PEXA Group Ltd (ASX: PXA).

Shares in the digital property exchange and data insights business closed April at $12.26 and finished May trading for $14.63 apiece, up 19.3%.

Much of that came on 2 May, when the ASX 200 stock closed up 11.0% after reporting it was progressing a strategic partnership with United Kingdom based lender, NatWest. Under the deal, NatWest will employ PEXA’s digital property exchange technology to deliver 48-hour remortgage transactions to its customers. The platform will also enable NatWest to speed up the handling of sale and purchase transactions.

Commenting on the deal, Joe Pepper, UK CEO of PEXA said, “As one of the UK’s major lenders, NatWest shares a common goal of driving digital innovation and transforming the customer experience to address the chronically long time it takes to transact property in the UK market.”

Investors also responded positively to PEXA’s third-quarter update on 7 May, with shares closing up 1.2% on the day.

Which brings us to the top performing ASX 200 stock in May, Telix Pharmaceuticals Ltd (ASX: TLX).

The Telix Pharmaceuticals share price ended April at $15.05 and closed out May at $18.15, up an impressive 20.6%.

There was a lot going on with the biopharmaceutical company over the month, starting on 3 May. That’s when the company announced it had completed the acquisition of QSAM Biosciences, a US-based company developing therapeutic radiopharmaceuticals for primary and metastatic bone cancer.

Shares dropped 4.2% when the company reported its first-quarter results on 17 May.

But investors were quick to pile back into the ASX 200 stock the following trading day when the company reported filing for an initial public offering (IPO) on the Nasdaq.

And Telix shares finished the month with a bang, closing up 15.3% on 31 May after management announced positive results from the company’s ProstACT SELECT clinical cancer trial.

Telix’s TLX591 drug is being developed to treat adult patients with PSMA-positive metastatic castrate-resistant prostate cancer.

The post Sell in May and go away? Not for these top 3 ASX 200 stocks! appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Bernd Struben 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 PEXA Group and Telix Pharmaceuticals. The Motley Fool Australia has recommended Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) has followed Wall Street’s lead and is charging higher. At the time of writing, the benchmark index is up 0.8% to 7,760.8 points.

Four ASX shares that are failing to follow the market higher today are listed below. Here’s why they are falling:

Lovisa Holdings Ltd (ASX: LOV)

The Lovisa share price is down 9% to $30.86. Investors have been hitting the sell button today after the fashion jewellery retailer announced the exit of its highly regarded CEO, Victor Herrero. He will leave in approximately 12 months after four years at the helm. Given how instrumental Herrero has been in guiding Lovisa’s international expansion, the market appears concerned about what might happen when he steps down from the role and hands the reins over to someone new. A replacement has been announced.

Premier Investments Limited (ASX: PMV)

The Premier Investments share price is down 4% to $28.82. This decline also relates to Victor Herrero’s exit from Lovisa. That’s because his replacement will be John Cheston, who is the CEO of the Premier Investments-owned Smiggle business. Much like Herrero, Cheston has overseen a very successful international expansion of the retailer. And with Premier Investments recently announcing the potential divestment of Smiggle into a separate listing, the loss of its CEO at this time will be a blow. Cheston will join Lovisa on 4 June 2025.

Silver Lake Resources Ltd (ASX: SLR)

The Silver Lake Resources share price is down 3.5% to $1.48. Investors have been selling Silver Lake and other gold miners on Monday following a pullback in the gold price on Friday. This has led to the S&P/ASX All Ords Gold index underperforming and dropping 0.6% today. Shareholders won’t be too disheartened, though. Silver Lake shares remain up 29% over the last six months despite falling 9% over the last couple of weeks.

WA1 Resources Ltd (ASX: WA1)

The WA1 Resources share price is down 7% to $19.73. This follows the release of further assays from broad-spaced reverse circulation and diamond drilling at the West Arunta niobium project in Western Australia. Management notes that the drilling has provided additional definition of the high-grade blanket of niobium mineralisation at the Luni deposit ahead of the initial Mineral Resource estimate. Judging by the share price reaction on Monday, it seems that some investors were expecting stronger results from the mineral exploration company’s drilling.

The post Why Lovisa, Premier Investments, Silver Lake, and WA1 Resources shares are tumbling today appeared first on The Motley Fool Australia.

More reading

• Why are Lovisa shares sinking 10% on a green day?
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• Up 66% in a year, the Lovisa share price just hit an all-time high
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Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The market may be pushing higher today, but the same cannot be said for Lovisa Holdings Ltd (ASX: LOV) shares.

At the time of writing, the fashion jewellery retailer’s shares are down a sizeable 10% to $30.58.

Why are Lovisa shares sinking?

Investors have been heading to the exits today after the company announced that its CEO, Victor Herrero, will be stepping down from the role next year.

According to the release, Herrero has agreed to an amended employment contract through to 31 May 2025.

After which, the highly regarded CEO will be replaced by John Cheston, who will join the company on 4 June 2025.

Why the reaction?

While CEO exits often receive poor reactions from investors, Lovisa shares are falling particularly heavily today. This is because the appointment of Victor Herrero was a real coup for the company and a key reason why many invested (myself included) in the company.

The outgoing CEO has been instrumental in Lovisa’s global expansion. And while a lot of the hard work has certainly been done since his arrival in 2021, there’s still a lot more to come. The market may be concerned that his exit now puts at risk the successful execution of this expansion.

Herrero joined Lovisa having spent 13 years with the Inditex Group, which is one of the world’s largest fashion retailers (Zara, Pull & Bear and Massimo Dutti). During his time at Inditex, he held numerous roles including Head of Asia Pacific and Managing Director Greater China and led the company’s expansion through this region rolling out 800 stores across multiple countries including China and India.

After which, Herrero spent four years as CEO of Guess, and was then the chairman and CEO of international shoe manufacturer and retailer Clarks.

The good news is that Lovisa’s chair, Brett Blundy, remains positive on the future and was pleased with the appointment of John Cheston. He said:

The Board and I are pleased to announce that Victor has entered an amended 12-month contract. The Board and I are also pleased to announce that John Cheston will join us as CEO and Managing Director on the 4th of June 2025. John is a highly successful Global retailer and will join Lovisa at a very exciting time as we continue our global growth.

Cheston is currently the CEO of Smiggle, which is owned by Premier Investments Limited (ASX: PMV). Its shares are down on the news of his departure from the role.

Given that Smiggle has also been successfully expanding internationally in recent years, Cheston appears to be a worthy CEO of Lovisa and should be able to pick up where Herrero leaves off.

The post Why are Lovisa shares sinking 10% on a green day? appeared first on The Motley Fool Australia.

More reading

• What are 3 of the safest ASX consumer discretionary shares in Australia right now?
• Up 66% in a year, the Lovisa share price just hit an all-time high
• Brokers name 5 fantastic ASX growth shares to buy in June
• 3 high-quality ASX shares tipped to generate strong returns
• These 2 ASX shares could win big time in the long term

Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has had a terrible 2024 to date, dropping by more than 30%, as shown on the chart below. Some investors may be wondering if this is an excellent buying opportunity. I’m going to use Warren Buffett’s advice to help decide.

Warren Buffett is one of the world’s greatest investors, he turned Berkshire Hathaway into one of the US’ largest and strongest businesses. He was, and still is, brilliant at finding stocks that the market was undervaluing for their long-term potential, such as Coca Cola and American Express.

One of Buffett’s most quoted investment pearls of wisdom could be applicable in this situation:

Be fearful when others are greedy and greedy when others are fearful.

I do think Buffett would be open to considering Domino’s shares because Berkshire Hathaway is the owner of Dairy Queen, a fast food chain in the US. But, is the Domino’s share price valuation attractive? I think there are a few factors that Buffett would consider.

Long-term expansion plan

Domino’s noted in a recent investor presentation that in two of its biggest ‘opportunity markets’ of Germany and France, it currently covers just 30% of the country.

The company’s growth outlook could be heavily influenced by how many more (profitable) stores it’s able to open.

Domino’s is looking to approximately double its total store count by 2033, which is 1.9 times its current market size. Achieving this scaling-up would be a significant positive for the Domino’s share price, in my opinion.

In Australia and New Zealand, it’s aiming for a total of 1,200 stores by 2027 or 2028. That growth would represent an increase of 1.3 times compared to its current size.

In Europe, the company aims to have 2,900 stores by 2033, which would equate to doubling in size.

In Asia, Domino’s wants to reach 3,000 stores by 2033; this would see Domino’s double in size in the region.

Domino’s noted its current operating regions have a population of 418 million, which is 25% larger than the US.

The company noted store expansion is “important to the growth of franchise partners and Domino’s Pizza Enterprises, but relies on improved unit economics”. It points out that longer delivery distances reduce profitability for those orders. An additional store on the edge of the delivery zone would significantly reduce the delivery distance for those orders, increasing product quality and delivery times for the customer. It would also improve the existing store’s unit economics.

Profit improvement

Domino’s has revealed it’s working on improving sales and unit economics to lift franchise partner profitability and store paybacks. Success here could be very useful for supporting the Domino’s share price.

It’s “applying proven approaches and expertise to rebuild unit economics.” Management and franchise partners are implementing “best practice with tactics that resonate locally”.

With a focus on growing volumes in every store, it’s working on new products, growth in aggregators (like Uber), targeting certain order price points (such as 5 Euros), increasing digital spending to reach new customers, improving product quality and aiming for faster customer resolution.

The ASX share is also trying to lower food costs, reduce delivery costs through “increased efficiency”, and reinvest savings initiatives into franchise partners.

For FY24, Domino’s is targeting network savings of around $50 million through a restructuring, with one-third of that being shared with franchise partners.

Same-store sales growth

The performance of existing stores is important for Domino’s and its partners too.

Domino’s is targeting annual same-store sales (SSS) growth of between 3% to 6% over the next three to five years. It achieved this target in the first halves of FY19, FY20 and FY21, but it hasn’t achieved it since. The FY24 first-half result experienced SSS growth of 1.25%.

If the company can achieve annual SSS growth of 3% from here, I think that would be a solid result considering its store count is expected to increase over the next decade.

Would Warren Buffett buy Domino’s shares?

At Domino’s much lower current share price, I think Warren Buffett would have a look at the company. The share price has actually been down approximately 75% since September 2021, making it a lot cheaper presently.

According to the estimates on Commsec, the company is now valued at 28x FY24’s forecast earnings and 19x FY26’s estimated earnings. With significant growth planned for the next decade, combined with ongoing population growth in key markets, I think Domino’s shares could be an underrated buy.

The post Would Warren Buffett buy Domino’s shares? appeared first on The Motley Fool Australia.

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American Express is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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 Berkshire Hathaway, Domino’s Pizza Enterprises, and Uber Technologies. The Motley Fool Australia has recommended Berkshire Hathaway and Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you’re on the lookout for promising  All Ordinaries Index (ASX: XAO) shares, it’s always wise to consider companies with high-quality fundamentals.

To many, that means growing sales and profits. Some look at dividend growth and yield instead. For others, it is a combination of both ingredients that makes the recipe ‘just right’.

In my opinion, investors seeking high-quality business franchises with respectable dividends might want to consider Helia Group Ltd (ASX: HLI) and Wesfarmers Ltd (ASX: WES). Both ASX All Ords shares could present compelling opportunities for capital growth and passive income going forward.

Helia Group Ltd (ASX: HLI)

Helia Group is an insurance provider specialising in lenders mortgage insurance (LMI), which protects lenders against potential defaults. By providing LMI, the ASX All Ords share enables homebuyers to purchase properties with as little as a 5% deposit.

Helia’s business model and management brought in strong financial results and respectable dividends last year.

In FY 2023, Helia reported net profit after tax (NPAT) of $275.1 million, a 37% increase. Management revised guidance for this year and now projects FY 2024 insurance revenue of $360 million to $440 million (from $427 million previously).

Despite this double-digit profit growth, the ASX All Ords share trades at a price-earnings ratio (P/E) of 4.86 times at the time of writing.

That is a 73% discount to the iShares Core S&P/ASX 200 ETF (ASX: IOZ), which currently trades at a P/E of 17.96. This exchange-traded fund (ETF) tracks the other major Australian index, the S&P/ASX 200 Index (ASX: XJO). There is no ETF that tracks the All Ords Index.

Helia’s dividends have also been rising. In FY 2023, the company paid 59 cents per share, including a special unfranked dividend of 30 cents per share. The previous year, it paid a 36.5 cents per share dividend.

Based on its current price of $4.21 at the time of writing, Helia offers a trailing dividend yield of 6.89%. Compared to many high-interest savings accounts that currently pay 4%–6% interest per annum, this puts Helia at a relative advantage for income-seeking investors.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is a diversified conglomerate with a strong portfolio of retail, healthcare, and chemical brands.

The ASX All Ord share’s diverse operations include renowned franchises like Bunnings and Kmart. As I’ve noted previously, this diversification helps mitigate risks and creates multiple sources of value.

Broker Goldman Sachs expects 6% and 11% growth in revenue and earnings before tax and interest (EBIT) growth, respectively, for Bunnings in FY 2025/2026. This, it says, could generate annual free cash flow of $2.5 billion–$3 billion for the company.

This is healthy, in my opinion, as it can fund Wesfarmers’ other high-growth categories, like health and lithium.

Meanwhile, as my colleague Tristan reported, UBS noted four “improvements” Bunnings could deliver. These were improvements in the supply chain, real estate efficiency, customer experience, and commercial offering. Goldman and UBS value Wesfarmers at $68.80 and $66 apiece, respectively.

The company’s recent fully franked dividend of $1.94 per share offers a trailing yield of 2.99% after growth of 3.4% year over year.

ASX All Ords shares takeaway

Helia Group and Wesfarmers could be two sensible ASX All Ords shares to consider for your portfolio.

My view is that Helia is trading cheap, while Wesfarmers provides diversified operations and promising growth prospects.

Remember that past performance is no guarantee of future results and that you should consider your own personal financial circumstances before making any decisions.

The post 2 great ASX All Ords shares that I’d like to buy appeared first on The Motley Fool Australia.

More reading

• Do Wesfarmers shares pay a decent ASX dividend?
• ASX retail shares mixed amid modest April sales growth
• ASX investors may choose supermarkets over Wesfarmers shares after ACCC inquiry: broker
• Why did Goldman Sachs just downgrade Wesfarmers shares?
• Why AIC Mines, Fletcher Building, Nufarm, and Wesfarmers shares are dropping

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 positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.