Category: Stock Market

With lithium prices rebounding to their highest levels since December last week, some investors appear to believe that the worst could now be over. This led to a number of ASX lithium shares ending last week with strong gains.

The good news is that the gains may not be over for the ASX lithium shares listed below.

They have been named as buys by analysts and tipped to rise strongly from current levels.

Arcadium Lithium (ASX: LTM)

The team at Macquarie thinks that this lithium giant’s shares are great value at the current level.

Last week, the broker retained its outperform rating with an $11.00 price target. This implies potential upside of almost 30% for investors over the next 12 months.

Macquarie sees potential for its shares to re-rate to higher multiples over the medium term.

Delta Lithium Ltd (ASX: DLI)

Another ASX lithium share that has been named as a buy with major upside potential is Delta Lithium. It is focused on advancing the Mt Ida Lithium Project towards production and explorating the highly prospective Yinnetharra Lithium Project.

Bell Potter is a fan of the company and has a speculative buy rating and 75 price target on its shares. This suggests that its shares could more than double in value over the next 12 months.

Liontown Resources Ltd (ASX: LTR)

Bell Potter also believes that lithium developer Liontown could be a buy. Its analysts have a speculative buy rating and $1.60 price target on its shares. This implies that upside of approximately 25% is possible for investors.

The broker believes Albemarle’s failed takeover bid demonstrates the quality of its Kathleen Valley operation. It said:

LTR remains our preferred lithium developer. We expect production will ramp-up as lithium prices and market sentiment improve. Albemarle’s 2023 bid (subsequently withdrawn) highlighted Kathleen Valley’s highly strategic nature in terms of its stage of development, long mine life and location.

The post 3 ASX lithium shares with huge upside to buy in March appeared first on The Motley Fool Australia.

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More reading

• 6 ASX shares to buy and hold until the next leap year
• Here are the top 10 ASX 200 shares today
• Why are Core Lithium shares jumping 12% on Friday?
• Here are the top 10 ASX 200 shares today
• Why are ASX lithium shares like Liontown having such a bumper session today?

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 positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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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February 29 may have come and gone, but if you want to force yourself to invest for the long run, you could think about which ASX shares you’d want to own in the next leap year.

With this mindset, Moomoo market strategist Jessica Amir nominated six ASX shares that she’d be happy to buy now and hold until 29 February 2028:

2 technology stocks to put away until 2028

Large-cap tech stock WiseTech Global Ltd (ASX: WTC) may have returned a spectacular 361% to investors over the past five years, but Amir reckons there’s more where that came from.

“[There’s] growth potential — increased scale and increasing demand for logistics technology,” she said.

“The company is confident that EBITDA margins will return to 50%+ by FY26, with further cost-saving efficiencies to come.”

She noted its clients are loyal as it would be a huge hassle for courier companies to change their main software, and 84% of the revenue is recurring.

“[WiseTech has] launched new products to keep clients and draw in new business such as NEO, allows planning, booking, tracking and management of freight. 

“It’s now offering customs and compliance features – for imports/exports – targeting 90% global manufacturers.”

Also in technology, but further up the supply chain, is data centre provider Nextdc Ltd (ASX: NXT).

Its shares have already risen 28% so far this year.

“Positioned to capture [and] generate AI opportunities… Market is telling you that it’s exciting about its future and that it’s essential in AI.”

Even after averaging a sensational underlying earnings compound annual growth rate (CAGR) of 20%, the business is now at a “tipping point”, Amir reckons.

“Half of its revenue is from NSW and ACT — huge potential to expanding capacity and geographically — and it’s doing that.”

2 resources stocks to have in the portfolio for years to come

ASX mining shares are notoriously cyclical, but there are two that Amir would be happy to buy now to hold until 2028.

Due to a bear market for iron ore, BHP Group Ltd (ASX: BHP) shares are now 13% down year to date. She feels like that presents a “great opportunity to buy”.

While iron ore may be in for even worse times in the short term because of the troubles in the Chinese construction industry, there is hope.

“Vale SA (BVMF: VALE3), the world’s second-largest iron ore producer (behind BHP), said it’s looking to boost iron ore sales outside of China and sell to Europe, India, the Middle East and Southeast Asia,” said Amir.

“Vale’s iron ore is tight – no new supply coming this year… Australia’s production little changed, so iron ore price probably won’t remain in bear market.”

Also, BHP is well diversified in the minerals that it produces, which can smooth out the cyclicality somewhat.

“Beneficiary of increasing copper demand over next 5 to 10 years. BHP makes 26% of revenue from copper.”

Lithium prices have been stuck in a severe depression the past 12 months, and the stock that Amir would pick up for cheap right now is Liontown Resources Ltd (ASX: LTR).

But she warned it would be a “slow, not wild” climb back up.

“[The] lithium sector suffering punitively lower price. Lithium prices  — carbonate and hydroxide — [are] back at 2021 levels on excess supply vs demand.”

In the long-term though, the electric car market has much growing left to do.

“Australia [has only] 10% penetration.

“All in all, this means, demand for key components on EVS, such as lithium will continue to rise, which is why lithium stocks are starting to claw back.”

A couple of niche ASX shares to hold on to

Amir also nominated a pair of ASX companies that cater for specific needs as perfect candidates to buy and hold right now.

Audio networking technology provider Audinate Group Ltd (ASX: AD8) has enjoyed a massive 174% rise in its share price over the past 12 months.

But the fact remains, according to Amir, orders for AV are set to “boom”.

“This company means business, achieving its FY24 objectives 6 months ahead of plan.”

Audinate commercialised a “significant milestone” during the last half when it introduced the ability to synchronise audio directly from its networks into the cloud.

“Online production can happen anywhere, which reduces the need for mobile studios and full broadcast trucks,” said Amir.

“This is one of the [reasons] it sees margins improving. Plus, it cut costs [and] gaining new contracts.”

Fintech stock Block Inc CDI (ASX: SQ2) has enjoyed an even steeper ride up, doubling since the start of November.

Amir notes it makes the third most popular smartphone app in the US to send money.

“[When] US central bank cuts rates in 2024, that will boost discretionary spending and Block’s revenue.”

The company also has interests in cryptocurrency, so the 143% rocket in the value of Bitcoin (CRYPTO: BTC) since September has been huge for Block Inc.

“Making money from Bitcoin and benefit from Bitcoin halving [in April]… 43% of revenue is from Bitcoin.”

The post 6 ASX shares to buy and hold until the next leap year appeared first on The Motley Fool Australia.

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More reading

• Here’s how the ASX 200 market sectors stacked up this week
• 34 ASX 200 shares with ex-dividend dates next week
• How ASX shares vs. property performed in February
• Brokers name 3 ASX shares to buy now
• Why are Core Lithium shares jumping 12% on Friday?

Motley Fool contributor Tony Yoo has positions in Audinate Group, Bitcoin, and Block. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Audinate Group, Bitcoin, Block, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Audinate Group, Block, and WiseTech Global. 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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Income investors love their passive income, so with reporting season almost done, we canvas the boards to identify the ASX stocks that delivered some of the biggest dividend boosts of the season.

All of these companies below delivered a more than 30% increase in dividends this earnings season.

9 ASX stocks delivering turbocharged passive income

AGL Energy Limited (ASX: AGL) wowed passive income investors with a 225% increase in its interim dividend for FY24. This followed a 358% profit surge over the first half. The ASX utilities stock will deliver 26 cents per share in unfranked passive income for investors.

Corporate Travel Management Ltd (ASX: CTD) reported a 162% profit bump in 1H FY24. The ASX travel stock is set to pay an interim dividend of 17 cents per share, up 183%.

Inghams Group Ltd (ASX: ING) rewarded shareholders with a 167% dividend increase after reporting a doubling in profit. Inghams will pay a fully franked interim dividend of 12 cents per share, delivering a passive income boost of 167%.

Origin Energy Ltd (ASX: ORG) reported an almost 1,600% skyrocketing in profits in 1H FY24. Origin stock will pay ASX investors a fully franked interim dividend of 27.5 cents per share. That’s up 66% on 1H FY23.

QBE Insurance Group Ltd (ASX: QBE) reported doubled profits in FY23. The insurer will pay a final dividend of 48 cents per share, up 60% on FY22.

Australian Ethical Investment Ltd (ASX: AEF) reported a 71% profit improvement. It will pay an interim dividend of 3 cents per share. That’s a 50% boost in passive income for its shareholders.

Insurance Australia Group Ltd (ASX: IAG) will once again pay a turbocharged dividend. Despite reporting a 13% profit decline, the insurer boosted its interim dividend by 67% to 10 cents per share.

Fortescue Ltd (ASX: FMG) is known for delivering generous passive income, and the ASX iron ore pure-play did not disappoint this earnings season. The company reported a 41% profit improvement and boosted its interim dividend by 44% to $1.08 per share, fully franked.

Computershare Ltd (ASX: CPU) gave investors a 33% passive income boost this earnings season. The administration services company announced a record margin income for 1H FY24. It rewarded shareholders with an interim dividend of 40 cents per share with 20% franking.

The post Passive income watch: The ASX stocks dishing out the biggest dividend boosts this earnings season appeared first on The Motley Fool Australia.

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• Which ASX shares delivered the biggest profit jumps of the earnings season?
• 34 ASX 200 shares with ex-dividend dates next week
• $42 million tops the most notable ASX 300 insider buys this earnings season
• A 22% yield on Fortescue shares? Here’s how these passive income investors achieved it!
• Why Flight Centre, Fortescue, Kelsian, and Neuren shares are dropping today

Motley Fool contributor Bronwyn Allen 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 Australian Ethical Investment and Corporate Travel Management. The Motley Fool Australia has recommended Australian Ethical Investment and Corporate Travel Management. 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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Some ASX shares are exciting growth stocks, while other names are compelling picks for dividend income. I’m going to talk about three ASX dividend shares I’d like to own for retirement.

Businesses that have generous dividend payout ratios can lead to solid dividend yields.

Retirement is an important stage when it comes to finances – winding down work earnings means that investment income earnings (and stability) are essential. I wouldn’t want to see my income completely disappear when I need it most.

These are three I’d want to own.

Centuria Industrial REIT (ASX: CIP)

This is a real estate investment trust (REIT) that owns a portfolio of industrial properties across in-demand markets where there is a limited availability of assets that can meet the tenant demand.

In February, the business reported 6% like-for-like net operating income growth. In the first half of FY24, it delivered re-leasing spreads of 51%, meaning it’s now getting rental income that’s 51% more on a new rental contract compared to the old contract.

Ross Lees, Centuria head of funds management, said:

CIP has had a longstanding differentiated strategy to build a portfolio of high-quality urban infill logistics assets. It is pleasing to see this long-term disciplined approach to portfolio construction, alongside an active approach to asset management, resulting in significant rental growth being delivered for unitholders.

It has an occupancy rate of 97.2%, a weighted average lease expiry (WALE) of 7.5 years and an expected distribution yield of 4.8% for FY24.

I think the rental profit outlook is very promising for this ASX share.

Medibank Private Ltd (ASX: MPL)

Medibank is the leading business in the health insurance space, with its Medibank and ahm brands.

Healthcare is the type of spending category that I’d guess a lot of households will continue with even if their finances are tighter because health is a crucial aspect of our lives.

The recent FY24 first-half result was a good example of how the business is performing during this challenging period – it saw net resident policyholder growth of 3,400 and net non-resident policy unit growth of 33,800.

HY24 saw revenue from external customers increase by 3.3% to $4.02 billion, group operating profit rose 4.2% to $319.4 million, net profit after tax (NPAT) jumped 103.2% to $343.2 million, the underlying NPAT went up 16.3% and the interim dividend per share increased 14.3% to 7.2 cents.

The last two dividends declared amount to a grossed-up dividend yield of 6.1%.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

Soul Pattinson is a diversified investment house that owns a large array of investments across different sectors, including telecommunications, resources, building products, property, financial services, agriculture, financial services, swimming schools and so on.

It has already existed for over 120 years, and I think there are strong reasons to believe it can be around in another 50 years. The fact it can alter its portfolio as time goes by makes me think it can always adjust its portfolio to be aimed at future growth areas.

The ASX share has grown its dividend each year since 2000, which is the longest growth streak on the ASX. It currently has a trailing grossed-up dividend yield of 3.6%.

The post If I were entering retirement tomorrow, I’d buy these ASX shares appeared first on The Motley Fool Australia.

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More reading

• What’s going on with the Medibank share price today?
• The ASX shares I’m buying for a stress-free retirement
• Hoping to bag the record Medibank dividend? Here’s what you need to do
• How much would I need to invest in ASX shares for a retirement income of $80,000 per year?
• Buying Soul Patts shares? Here’s what you’re really buying

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company 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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If you’re interested in adding some ASX exchange traded funds (ETFs) to your portfolio in March, then it could be worth getting better acquainted with the three listed below.

Here’s what sort of companies you will be investing in if you buy these ETFs:

ETFS Battery Tech & Lithium ETF (ASX: ACDC)

If you’re confident on the outlook of electric vehicles and lithium, then the ETFS Battery Tech & Lithium ETF could be the one for you. Rather than having to decide which ASX lithium share to buy, you can own a group of them in one fell swoop. This ETF invests in companies throughout the lithium cycle, including mining, refinement and battery production.

Vanguard Australian Shares Index ETF (ASX: VAS)

If you want an easy way to invest in the Australian share market, then the Vanguard Australian Shares Index ETF could help you do it. It is a low-cost, diversified, index-based exchange-traded fund that aims to track the ASX 300 index. This means you’ll be buying a diverse group of 300 shares such as footwear retailer Accent Group Ltd (ASX: AX1), miner BHP Group Ltd (ASX: BHP), and banking giant Commonwealth Bank of Australia (ASX: CBA).

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Alternatively, if you want to invest globally, then the Vanguard MSCI Index International Shares ETF could be the answer. This popular ETF gives investors easy access to approximately 1,500 of the world’s largest listed companies from major developed countries. This allows you to gain exposure to global economic growth. It also means you can almost instantly diversify a portfolio. That’s because among its holdings are companies from sectors ranging from technology to financials and healthcare to energy.

The post 3 excellent ASX ETFs to buy in March appeared first on The Motley Fool Australia.

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More reading

• 14% in 4 months: How has the Vanguard Australian Shares ETF (VAS) managed it?
• Top ASX shares to buy in March 2024
• How to build a second retirement fund outside of superannuation
• How much would I need to invest in ASX shares for a retirement income of $80,000 per year?
• 4 ASX ETFs to supercharge your wealth

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 positions in and has recommended Global X Battery Tech & Lithium ETF. The Motley Fool Australia has recommended Accent Group, Global X Battery Tech & Lithium ETF, and Vanguard Msci Index International Shares ETF. 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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In the past, Qantas Airways Limited (ASX: QAN) shares were a popular option for passive income investors.

Unfortunately, that hasn’t been the case in recent years, with the airline operator suspending its dividend since the pandemic.

But with the company now generating bumper profits, could Qantas become a top option for passive income soon?

Let’s see what is on the cards for 2024 and beyond.

Should you buy Qantas shares for passive income?

I have good news and bad news for you.

The bad news is that most brokers believe that FY 2024 may be a year too soon for a return to dividend payments.

While there is a broker predicting a small final dividend in August, that’s not going to move the needle much with a $10,000 investment.

But hang in there, because the Flying Kangaroo could reward shareholders handsomely in FY 2025.

Investing $10,000

Firstly, if you were to invest $10,000 in Qantas shares, you would end up owning 1,934 units.

What sort of passive income could these shares generate?

Well, according to a note out of Goldman Sachs, it believes that the company will pay a 30 cents per share dividend next year.

Based on its current share price of $5.17, this will mean a very attractive 5.8% dividend yield for investors.

It will also mean that your 1,934 Qantas shares generate approximately $580 of passive income.

And with Goldman expecting another 30 cents per share dividend in FY 2026, you can expect to receive the same amount of income that year.

But it gets better.

With Goldman putting a buy rating and $8.05 price target on its shares, your 1,934 units would have a market value of $15,568.70 if they rose to that level.

That’s a return of $5,568.70, which may just make up for the lack of dividends this year.

The post If I invest $10,000 in Qantas shares, how much passive income will I receive in 2024? appeared first on The Motley Fool Australia.

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More reading

• Analysts think these ASX 200 shares are dirt cheap buys
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• Qantas descends, Treasurer’s RBA dilemma and Twiggy’s payday: Scott Phillips on Nine’s Late News
• Brokers name 3 ASX shares to buy now
• Why Qantas shares could rise over 50%

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 positions in and has recommended Goldman Sachs Group. 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.

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Interest in the ‘magnificent seven’ stocks here on the ASX has arguably never been as strong as it is today.

The likes of Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms Inc (NASDAQ: META) and Netflix Inc (NASDAQ: NFLX) have long dominated ASX investor interest.

These US tech shares have been growing at jaw-dropping rates for decades now. ASX investors are probably familiar with the old ‘FAANG’ acronym (now defunct thanks to various name changes) that these companies used to be grouped under.

But thanks to the rise of other tech giants, namely Tesla Inc (NASDAQ: TSLA), Microsoft Corporation (NASDAQ: MSFT) and (especially) NVIDIA Corporation (NASDAQ: NVDA), FAANG has been replaced with ‘the magnificent seven’.

It’s not really clear why Netflix has been dropped as a star stock here. I suppose the ‘magnificent eight’ doesn’t have the same ring to it. Nor the same connection to old Hollywood.

As you’ll no doubt be aware, it’s impossible to directly invest in these seven stocks here on the ASX. Given they are all US-listed companies and all.

However, that doesn’t mean ASX investors who want a slice of the ‘magnificent’ action but don’t want to directly buy US shares, are out of luck. There are a few ways ASX investors can invest in these companies from the comfort of their own markets.

How to invest in the magnificent seven on the ASX

So the most direct way to invest in the magnificent seven on the ASX is arguably through exchange-traded funds (ETFs).

The ETF that gives investors the purest access is probably the Global X FANG+ ETF (ASX: FANG).

This ETF holds just ten underlying holdings. Seven of which, you guessed it, are the magnificent seven. The other three are Broadcom Inc (NASDAQ: AVGO), Snowflake Inc (NYSE: SNOW) and our old friend Netflix.

Each of these ten stocks currently commands a FANG portfolio weighting of between 7.21% (Tesla) and 13.79% (Nvidia).

This means that if one invests $100 into this ETF, almost $70 will be invested across the magnificent seven.

That’s about as close as you can get to directly investing in these companies yourself on the ASX.

Another option is opting for a Nasdaq index fund. The magnificent seven are currently among the eight largest stocks by market capitalisation on the Nasdaq stock exchange. So an index ETF like the BetaShares NASDAQ 100 ETF (ASX: NDQ) is going to have a sizeable allocation to each of them.

At present, if one invests $100 into NDQ units, just over $40 of that invested capital will end up in the magnificent seven. The other $60 or so will go towards other Nasdaq shares like Adobe Inc (NASDAQ: ADBE), Netflix, Starbucks Corp (NASDAQ: SBUX) and Airbnb Inc (NASDAQ: ABNB).

So these two ASX ETFs are probably the easiest way for an Australian investor to invest in the magnificent seven stocks without leaving the ASX.

The post How to invest in the magnificent seven stocks on the ASX appeared first on The Motley Fool Australia.

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More reading

• The Nasdaq just hit a fresh all-time high. What could it mean for Aussie investors?
• How to build a second retirement fund outside of superannuation
• 4 ASX ETFs to supercharge your wealth
• These ASX ETFs could be world class options in February
• Buy and hold these ASX ETFs for 10 years or more

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Adobe, Airbnb, Alphabet, Amazon, Apple, Betashares Nasdaq 100 ETF – Currency Hedged, Meta Platforms, Microsoft, Starbucks, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adobe, Airbnb, Alphabet, Amazon, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, Snowflake, Starbucks, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Adobe, Airbnb, Alphabet, Amazon, Apple, Betashares Nasdaq 100 ETF – Currency Hedged, Meta Platforms, Nvidia, and Starbucks. 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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Are you looking for big returns for your investment portfolio? If you are then it could be worth checking out the ASX 200 shares listed below.

That’s because they have been named as buys by analysts and tipped to rise strongly over the next 12 months.

Here’s what they are predicting for these shares:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Morgan Stanley believes this pizza chain operator’s shares could be seriously undervalued at current levels.

A note from last month reveals that its analysts have an overweight rating and $68.00 price target on them.

Based on the current Domino’s share price of $44.87, this implies potential upside of approximately 51% for the ASX 200 share over the next 12 months.

Northern Star Resources Ltd (ASX: NST)

The team at Macquarie think that Northern Star could be a great option for investors that are looking for exposure to gold.

Last month, following the release of a half-year result that was largely in line with its expectations, the broker retained its outperform rating and $16.00 price target on the ASX 200 gold share.

Based on the latest Northern Star share price of $12.94, this price target would mean a 24% return for investors over the next 12 months.

ResMed Inc. (ASX: RMD)

Analysts at Macquarie also still see plenty of value in this ASX 200 medical device company’s shares despite a strong recent run.

Following its quarterly update, which came in comfortably ahead of the broker’s expectations, its analysts retained their outperform rating on its shares with an improved price target of $33.45.

Based on the current ResMed share price of $26.72, this suggests potential upside of 25% for investors between now and this time next year.

The post These ASX 200 shares could rise 20% to 50% appeared first on The Motley Fool Australia.

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More reading

• 34 ASX 200 shares with ex-dividend dates next week
• Here are 2 high-quality ASX 200 blue chip shares that analysts are bullish on
• 5 things to watch on the ASX 200 on Friday
• Why Australian Finance Group, Chalice, DroneShield, and ResMed are sinking today
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises, Macquarie Group, and ResMed. The Motley Fool Australia has positions in and has recommended Macquarie Group and ResMed. The Motley Fool Australia has recommended 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.

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It can be tricky working out ASX value shares.

The very definition makes identifying such stocks a subjective exercise. Different investors have varying criteria as to what they consider a bargain.

For me, I do a simple test. Does the business have a positive outlook?

Using this simple metric, I have picked out one that I am convinced is value right now and another that seems like a sure value trap:

ASX value shares not slowing down for anyone

Regis Healthcare Ltd (ASX: REG) provides aged care residences, including for clients with specialised needs such as dementia and palliative care.

Incredibly its share price has rocketed more than 151% since a trough in March last year.

And the market has warmly received its contribution this reporting season, sending the share price almost 6% upwards just on Monday.

Revenue for the first half was up 26% and net profit after tax (NPAT) before amortisation of operational places rocketed 527%.

To top it off, Regis Healthcare is paying out a respectable 3.7% half-franked dividend yield.

A rapidly ageing population in Australia also provides a long-term demographic tailwind for Regis and its industry.

Professional investors are thus bullish on Regis’ future. 

Broking platform CMC Invest currently shows five out of six analysts rating the shares for the $1.1 billion aged care provider as a buy.

‘A serial destroyer of shareholder value’

Meanwhile, construction giant Lendlease Group (ASX: LLC) has sat through a much less comfortable earnings season.

In fact, it’s been downright painful, with the shares diving 15% on the morning that its half-year numbers were revealed on 19 February.

Just before COVID-19 panic struck the ASX, LendLease shares were almost touching the $20 mark. But now, just four years later, they are only slightly above $6.

All up it has burnt nearly 70% of value for shareholders since February 2020.

Tanarra chief executive John Wylie, who had supported the company for a long time, finally ran out of patience.

“This is a broken business model and the company clearly needs restructuring,” Wylie told the Financial Review after the half-year results. 

“Lendlease has a reputation of building fine buildings, but it is also a serial destroyer of shareholder value.”

This is why I think maybe LeadLease is one to leave on the shelf, at least for now.

Only two out of nine analysts covering the stock currently recommend it as a buy, according to CMC Invest.

The post Looking for ASX value shares? Here’s 1 I’d buy and 1 I’d avoid! appeared first on The Motley Fool Australia.

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More reading

• Why Lendlease, New Hope, Nuix, and Orora shares are dropping today
• Lendlease share price crashes on $136m half-year loss

Motley Fool contributor Tony Yoo 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.

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The Zip Co Ltd (ASX: ZIP) share price has done incredibly well for shareholders this year. It just hit a 52-week high, and it has lifted by 63% in 2024 to date.

The company reported impressive revenue growth and even stronger profit growth. Let’s quickly remind ourselves of the highlights of the result.

Earnings recap

Zip reported its overall revenue increased by 28.9% to $430 million, while total transaction volume (TTV) improved by 9.6% to $5 billion. How did revenue improve by so much more than TTV? The revenue margin increased 130 basis points (meaning 1.30%) to 8.5%.

The number of merchants rose 9.3% to 76,200, and the number of active customers increased to 6.3% (up 1.6%).

Zip Americas saw revenue rise by 40.3%, and ANZ revenue increased by 22.7%.

The cash gross profit increased by 45.9% to $176.2 million, and Zip achieved group cash earnings before tax, depreciation and amortisation (EBTDA) of $30.8 million. This was driven by a “strong seasonal performance” with US TTV, improved margins and cost discipline.

It reported a cash net transaction margin (NTM) of 3.5%, which was an increase of 90 basis points compared to the FY23 first-half, which the company called a “strong result” in a rising interest rate environment.

Profit growth is key for the Zip share price from here, in my opinion.

The company did report a net profit after tax (NPAT), but that was due to a net gain relating to its senior convertible notes, which was a one-off.

Despite the higher interest rates, group net bad debts were only 1.9% of TTV, which was stable year over year.

In the Australian business, it has adjusted its credit risk settings and tightened the lending criteria, which has delivered improved arrears and net bad debt performance, which is expected to continue in the second half of FY24.

Is this a good time to invest in Zip shares?

It clearly would have been better to buy a few weeks or months ago when the share price was cheaper.

The buy now, pay later company has done a great job of improving its balance sheet over the last 12 months, and it has been impressive how operating profitability has increased during this period.

I’m not expecting its margins to continue to improve, it has already seen a large ramp-up of profitability in the last couple of years. I think competition (or merchants complaining) could stop further significant revenue margin increases from here.

Despite the years of growth and margin improvements, Zip is only just starting to make a profit, so it will need to keep growing scale to make meaningful profit from here.

There’s a danger of arrears and bad debts rising if unemployment worsens or if the cost-of-living becomes too much for some customers to afford their instalments.

However, a fall in interest rates could lower Zip’s costs, help customers afford their repayments, and encourage more retail spending.  

I think the Zip share price might be higher in 12 months from now if revenue is higher and interest rates are lower, but that’s not certain.

It’s not something that I see buying for my own portfolio, but the fact the company is now making positive EBTDA is a positive development for its sustainability. I’d call it a speculative long-term idea after its rally.

The post Will I be buying Zip shares now the company has turned a profit? appeared first on The Motley Fool Australia.

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More reading

• Shares sold: Why Zip is under fire from its own shareholders
• Why Brainchip, DGL, Weebit Nano, and Zip shares are dropping today
• Zip share price tumbles 9% despite explosive first-half growth
• 2 rocketing ASX shares you need to think about getting on board
• Why Cettire, Dexus Industria, Pilbara Minerals, and Zip shares are jumping today

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 Zip Co. 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.

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