Category: Stock Market

QBE Insurance Group Ltd (ASX: QBE) shares are on the move on Thursday.

In morning trade, the insurance giant’s shares are down 6% to $18.62.

Why are QBE shares sinking?

Investors have been selling the company’s shares this morning after it released its third quarter update.

According to the release, QBE’s gross written premium growth in the nine months to 30 September was 6% compared to the prior corresponding period.

Management notes that ex-rate growth of 5% remained in line with first half trends, underpinned by sustained momentum across International and North America.

QBE’s gross written premium growth included a drag of around ~US$250 million from the run-off of non-core lines in North America. Excluding this, ex‑rate growth was 7%, or 6% on further excluding Crop.

Premium rate growth softens

The company advised that its premium rate increases in the nine months to 30 September were ~1.5%. This growth rate is modestly below the first half result, driven predominately by commercial property lines.

Premium rate increases for the Group excluding commercial property and Lloyd’s segments remain in line with first half growth rates at ~4%. It also notes that rate adequacy remains supportive across the portfolio heading into the year ahead.

Claims update

Management believes it is well-placed to achieve its claims guidance for the full year. It said:

We are confident in achieving our outlook for the year. In the aggregate, Group claims are expected to track broadly to plan, as we focus on delivering consistent and resilient performance. Following meaningful first half global catastrophe losses, catastrophe experience in the second half has been more benign to date.

The net cost of catastrophe claims in the ten months to October is anticipated at around ~$700 million, which is below the allowance for this same period of ~$950 million. QBE’s allowance for the months of November and December totals ~$200 million. On the current trajectory catastrophe costs are likely to be comfortably below allowance for FY25, marking the third consecutive year of favourability in this regard.

It also highlights that based on available data, the FY 2025 Crop current accident year combined operating ratio is expected to be slightly better than plan.

This strong outcome reflects the impact of recent actions to reset its Crop strategy, with a focus on achieving better portfolio balance, and remediating the private product portfolio.

Outlook

QBE has reiterated its FY 2025 guidance. It expects constant currency gross written premium growth in the mid‑single digits and a group combined operating ratio of ~92.5%.

Looking to FY 2026, management is feeling positive about its outlook. It said:

With our portfolio in better balance, alongside improved breadth and visibility of earnings, planning for FY26 is well progressed. Profitability remains attractive across the majority of lines and the year ahead appears constructive for further growth, and a continuation of strong returns.

QBE currently expects a group combined operating ratio of ~92.5% again in FY 2026.

The post Why are QBE shares sinking 6% today? appeared first on The Motley Fool Australia.

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• What does Macquarie think QBE shares are worth?

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 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.

Kiwi insurer Tower Ltd (ASX: TWR) has more than doubled its final dividend after reporting a record underlying profit.

The company’s unfranked dividend yield was already running at a generous 7.4% according to the ASX website; however, the company is looking like an even stronger dividend play after Thursday’s announcement.

Good numbers across the board

Tower said in a statement to the ASX that its underlying profit came in at a record NZ$107.2 million, up from $NZ$83.5 million the previous year, while net profit was NZ$83.7 million, up from NZ$74.3 million.

The company said the board had considered the strong financial results and decided to pay a final dividend of NZ16.5 cents, up from NZ6.5 cents for the same period the previous year.

Tower Chief Executive Officer Paul Johnston said the company had performed well:

This is an exceptional result, underpinned by Tower’s transformation, driven by investment in our digital platform and continued focus on underwriting discipline, technology, data, and efficiency. These actions demonstrate Tower’s commitment to delivering sustainable growth and building a resilient, customer-focused business for the future.

There was a caveat, however, with Mr Johnston saying that the company expected the conditions which underpinned the record results, including relatively benign weather, to normalise in the current financial year.

The company said it had increased its customer base 4% over the year to 318,000, with home insurance policies up 11%.

Cautious forecast on profit going forward

Tower said it expected its full-year results for the current year to drop back to be in the range of NZ$55 million to NZ$65 million, “assuming full utilisation of an updated NZ$45m large events allowance”.

The company said on Thursday that there were only two large events in FY25, which meant it only incurred NZ$7.2 million in large events costs, “allowing us to return NZ$30.8m after tax of our large events allowance to underlying NPAT”.

The company went on to say:

Benign weather, together with lower motor claims and prior-year targeted underwriting actions – such as tightening our risk appetite for high-theft-risk vehicles – also contributed to a reduction in NZ business-as-usual claims, from 57,783 in FY24 to 56,825 in FY25, while customers and policy count grew in the year. While policy and customer volumes have continued to grow, average premiums have reduced. This is due to a higher proportion of lower-risk new policies, consistent with Tower’s risk-based pricing approach, and more competitive pricing in the New Zealand market.

Tower’s ex dividend date has been set for 14 January, with the dividend to be paid on 29 January.

The post This insurance company has more than doubled its final dividend on record results appeared first on The Motley Fool Australia.

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• Bendigo Bank shares crash 20% in November: Are they a buy, hold or sell?
• Why EOS shares could rise 75% in just a year

Motley Fool contributor Cameron England 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.

Bendigo and Adelaide Bank Ltd (ASX: BEN) shares closed 0.2% higher on Wednesday afternoon, at $10.21 a piece. In November so far, the shares have declined by 20.54% and are now 23.23% lower than this time last year.

What happened to Bendigo Bank shares?

The bank reported its first-quarter results in early November. Investors weren’t impressed. Bendigo Bank reported a 3.2% drop in cash earnings after tax for the first quarter of FY26. This was also a 3.2% drop in the average quarterly earnings for the H1 FY25. Its residential lending was also 5.6% lower over the quarter. Although there was better news on the business lending front, with growth of 2.9%.

Earlier this week, the bank’s shares were hammered again. This time, the sell-off followed the results of an independent Deloitte investigation into suspicious activities at one of its branches between 1 August 2019 and 1 August 2025. Bendigo Bank engaged Deloitte to conduct the investigation after it identified and reported suspicious activity.

The Deloitte review concluded that deficiencies in the bank’s approach to identifying, mitigating, and managing money laundering and terrorism financing risk existed throughout the six-year period.

And Deloitte discovered that these deficiencies weren’t limited to the single branch either. The report identified weaknesses and deficiencies across many key aspects of Bendigo Bank’s Anti-Money Laundering and Counter-Terrorism Financing risk management approaches.

In response, the board said it is very disappointed with the findings. It added that it is fully committed to ensuring that the bank undertakes necessary enhancements to ensure it is compliant with its obligations.

Are they a buy, hold or sell? 

TradingView data shows that analysts are pretty bearish on Bendigo Bank shares. Out of 14 analysts, 8 have a hold rating and 5 have a strong sell rating.

The average target price for the stock is $10.86, which, after the latest price plunge, represents a potential 6.37% upside over the next 12 months. Some analysts believe the shares could drop to $7.39, implying a 27.62% downside for investors.

The team and Macquarie have assigned an underperform rating and a $10.50 price target to the shares. This implies a potential 2.84% upside is ahead for the bank. The broker said that it’s not overly impressed with Bendigo Bank’s latest results. The team said its trading update was “weak” and costs were also materially higher. The team said the results missed consensus expectations by 8%.

My take? I think Bendigo Bank shares are probably approaching the bottom. I’d sit tight for now.

The post Bendigo Bank shares crash 20% in November: Are they a buy, hold or sell? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies 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 positions in and has recommended Bendigo And Adelaide Bank. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

If you are wanting exposure to the defence sector, then it could be worth considering Electro Optic Systems Holdings Ltd (ASX: EOS) shares.

That’s because if Bell Potter is on the money with its recommendation, it could be destined to deliver huge returns for investors over the next 12 months.

What is the broker saying?

Bell Potter notes that EOS has just completed the acquisition of the MARSS Groups drone interceptor business.

While it will take time before there is a commercial product, the broker believes this is a good move by management given recent defence trends. It said:

EOS has acquired MARSS Groups drone interceptor business for an upfront consideration of €5.5m (A$10m) funded via existing cash reserves. Interceptor drones are an emerging hard-kill counter-unmanned aerial systems (C-UAS) technology. EOS expects 12-24 months of further development before full commercial launch, with ongoing investment of up to A$10m over the next three years, with potential for customer development funding.

Given recent political/industry attention and contract awards for this vertical we view this acquisition favourably, further leveraging EOS to the global C-UAS thematic. We believe EOS positioning the product as a lowest-cost solution is appropriate but expect competitive intensity to increase.

Bell Potter believes that interceptor revenue will start to be generated in FY 2027, and sees potential for double-digit growth from the business in the years that follow. It adds:

We have assumed an incremental $6m of Interceptor revenue in CY27e and expect this to grow at 10% thereafter, a conservative assumption, in our view.

Should you buy EOS shares?

While the broker thinks that a peace deal between Ukraine and Russia could weigh on its share price in the near term, it doesn’t feel a deal will impact its growth forecasts. As a result, it is urging investors to pick up EOS shares today. It said:

We expect a Ukraine peace deal to weigh negatively on share price sentiment in the short term but would likely see no change to our forecasts given current global defence spending rhetoric.

We retain our Buy rating and downgrade our TP to $8.10. EOS is positioned as a market leader in C-UAS solutions and is leveraged to increasing budget allocations to C-UAS technologies. We see positive news flow over the next 6 months stemming from C-UAS and RWS contract awards. Following the award of the A$20m Slinger contract in Nov-25, we estimate that our CY26e revenue forecast is 59% secured by announced contracts. We see material upside to our CY27e and beyond forecasts if at least 1 laser contract is awarded in CY26e.

As mentioned above, Bell Potter has a buy rating and $8.10 price target on EOS shares. This implies potential upside of 75% for investors over the next 12 months.

The post Why EOS shares could rise 75% in just a year appeared first on The Motley Fool Australia.

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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 positions in and has recommended Electro Optic Systems. 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 share price of Lendlease Group (ASX: LLC) has been exploring new depths this month. Lendlease shares have lost another 9.55% and are valued at $5.21 apiece at the time of writing.

The property developer’s stock is hovering near year lows and trades at more than 60% below its value from 5 years ago.

Prestigious projects

Lendlease was once considered a global powerhouse in property development and urban regeneration. Now, the sustained weakness has left investors questioning whether the worst is finally over or if more pain lies ahead.

The real estate group designs, builds, and manages large commercial, residential, and infrastructure projects. Its fingerprints are on some of the world’s most prestigious precincts, such as Sydney’s Barangaroo and the Elephant & Castle redevelopment in London.

Turbulent UK exit

A series of earnings downgrades, budget blowouts, delayed project deliveries, and rising interest rates have battered the company, Lendlease shares, and investors’ sentiment.

Lendlease also made a costly and turbulent exit from the US and UK property markets. The real estate shares dropped more than 17% in early April this year on completion of the sale of its UK Construction business to Atlas Holdings. The reason for the fall, was that investors were starting to have increased doubts about Lendlease’s ambitions.

Investors slowly started buying back into the property developer’s shares after it officially signed a joint venture agreement with the Crown Estate in the UK in May. However, the disposal of assets and stalled developments have reduced stabile earnings, while restructuring costs continue to dampen profitability.

Cleaner balance sheet

Despite its troubles, the property and construction company still owns valuable assets and long-standing relationships with governments and institutional investors. And after years of restructuring, the balance sheet looks cleaner with more cash and fewer risk-heavy assets.

The company expects FY26 to be a transition year, as it will continue to simplify its business. It anticipates a lower earnings contribution from major project completions, but it plans for a sharp rebound in earnings from FY27.

Growing funds under management

Looking further ahead, Lendlease has a strong pipeline of new development opportunities, including $25 billion in bids and plans to secure over $10 billion in FY26. Progress in international funds management, ignited by new partnerships, is set to support growth in funds under management over the medium term.

Execution remains the biggest challenge. Multi-billion projects take years to complete, making profits lumpy and dependent on external market conditions. Rising construction costs, labour shortages, and bureaucracy continue to threaten Lendlease margins.

Reputational fatigue

Lendlease also battles with reputational fatigue. Many fund managers are tired to hear yet ‘another turnaround scenario’.

Analysts are also divided. Most acknowledge Lendlease shares look cheap, after such a severe sell-off. Some brokers do see upside from current levels, but the average 12-month target price of $5.80 sits modestly above today’s share price.

This suggests an 11% upside and implies cautious optimism, rather than conviction.

The post Are Lendlease shares a bargain after hitting fresh lows? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther 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.

The team at Bell Potter have just released fresh analysis on ASX small-cap stock Aroa Biosurgery Limited (ASX: ARX). 

It is a New Zealand-based biomedical company specialising in soft tissue regeneration. It develops, manufactures, and distributes medical and surgical products.

The company’s principal market is the United States, where it markets four key products: 

• Endoform
• Myriad
• OviTex
• Symphony

These products improve healing in complex wounds and soft tissue reconstruction. 

It appears Bell Potter sees significant upside in this ASX small-cap stock on the back of positive 1H26 earnings. 

The broker has a buy recommendation and optimistic price target, suggesting more than 20% upside. 

What did the company report?

On Tuesday, Aroa Biosurgery released H1 FY26 Results. 

This included: 

• Total revenue of NZ$44.9 million (14% growth on H1 FY25)
• NZ$19.7 million in Myriad product revenue (33% growth on H1 FY25)
• NZ$19.2 million in total OviTex/OviTex PRSi product revenue (4% growth on FY25)
• Product gross margin of 85%
• Normalised EBITDA profit of NZ$1.8 million (up from NZ$1.5 million normalised EBITDA loss in H1 FY25)

FY26 Outlook

• Revenue of NZ$92-$100 million (10%-20% growth on FY25 on a constant currency basis)
• Normalised EBITDA of NZ$5-$8 million (19%-90% growth on FY25)

Commenting on AROA’s H1 FY26 results, Managing Director and CEO Brian Ward said:

We are very pleased with our first half performance, delivering NZ$44.9 million in total revenue, underpinned by strong Myriad growth, and our fourth consecutive quarter of positive operating cash flow.

We reaffirm our FY26 guidance of NZ$92–100 million in revenue and NZ$5–8 million normalised EBITDA. Looking ahead to the second half of FY26, we expect new clinical publications to further validate AROA ECM’s efficacy and strengthen its commercial uptake.

Reason for optimism for this ASX small-cap stock

Markets reacted positively to the results of Aroa Biosurgery yesterday. 

The stock price closed almost 8% higher at $0.68. 

Following the results, Bell Potter said ARX’s balance sheet continues to strengthen. 

We are confident regarding the ongoing performance of the Myriad sales team, while conviction levels surrounding the Tela Bio group are lower. Fortunately 2H is traditionally the stronger sales period for Tela.

The broker has a buy recommendation on this ASX small-cap stock and a price target of $0.85. 

From yesterday’s closing price, this indicates an upside of 25%. 

Elsewhere, TradingView has a 12-month price target of $0.845 and online brokerage platform Selfwealth lists the ASX small-cap stock as undervalued by approximately 30%.

The post This ASX small-cap stock could be set to rise 25% appeared first on The Motley Fool Australia.

More reading

• Bendigo Bank shares crash 20% in November: Are they a buy, hold or sell?
• Why EOS shares could rise 75% in just a year
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• 3 reasons Telstra shares are a screaming buy right now!

Motley Fool contributor Aaron Bell 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.

If there’s one corner of the market that consistently produces long-term wealth, it is technology.

Sure, 2025 has been volatile for ASX tech stocks, but history shows that the best time to buy future winners is often during periods of uncertainty, not after the recovery has already happened.

So, if you are looking to position your portfolio for the next phase of tech-led growth heading into 2026, it could be worth checking out the three ASX tech stocks listed below that analysts rate as buys:

Megaport Ltd (ASX: MP1)

The first ASX tech stock that could be a long term winner is Megaport.

Its global software-defined network allows businesses to connect directly to the world’s biggest cloud providers, including Amazon Web Services, Google Cloud and Microsoft Azure, with speed and flexibility traditional networks simply can’t match.

As enterprises accelerate their shift toward hybrid cloud environments and AI workloads require faster, more flexible networking, Megaport sits in the sweet spot of a long-term structural trend. It has also just announced a key acquisition in India, which significantly boosts its addressable market.

Earlier this week, the team at Morgans upgraded Megaport’s shares to a buy rating with a $17.00 price target.

NextDC Ltd (ASX: NXT)

The AI boom isn’t slowing down, and NextDC is one of the clearest beneficiaries on the ASX. Its network of hyperscale data centres is experiencing strong demand from cloud providers, enterprise customers, and AI-driven infrastructure requirements.

NextDC continues to invest heavily in new facilities, expand its footprint and secure long-term customer commitments. As data usage, cloud adoption and AI modelling continue to surge, the company is positioned for years of sustained growth.

Macquarie is a fan of the data centre operator. It has an outperform rating and $20.90 price target on its shares.

Siteminder Ltd (ASX: SDR)

A third ASX tech share that could be destined for big things is Siteminder. It has established itself as one of Australia’s global software-as-a-service success stories.

Its cloud-based hotel commerce platform now serves tens of thousands of accommodation providers worldwide, helping them manage bookings, pricing, distribution and payments through a single interface.

The company continues to benefit from the global shift towards digital hotel management. Larger properties are upgrading outdated systems and smaller operators are moving online for the first time.

With strong annualised recurring revenue, improving margins and a massive international footprint still to penetrate, Siteminder is shaping up as a long-term compounder that the market isn’t fully appreciating yet.

Macquarie is also a fan of this one. It has an outperform rating and $8.55 price target on its shares.

The post The next wave of ASX tech winners to buy before 2026 appeared first on The Motley Fool Australia.

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

Telstra Group Limited (ASX: TLS) shares closed 0.61% lower on Wednesday afternoon, at $4.92 a piece. For the month, the shares are 0.41% higher, and they’re now 25.83% higher than this time last year.

Right now, I believe the leading Australian telecommunications and technology company is a screaming buy. Here’s why.

1. Telstra’s dividends provide a reliable passive cashflow

Telstra has a reputation for handing out large and regular fully franked dividend payments to its shareholders. It’s known for being one of the most reliable options on the index, which is great for any investor seeking a passive income. Telstra has paid out a steadily increasing dividend yield for several years, including during the COVID pandemic period.

Commsec analysts have forecast that Telstra will pay an annual dividend per share of around 20 cents in FY26. That translates to a grossed-up dividend yield of 5.6%, including franking credits. 

UBS thinks this could be even higher. The broker is currently forecasting that Telstra could pay an annual dividend per share of 21 cents in FY26 (with further dividend increases in the coming years). This implies the company could deliver a cash dividend yield of 4.2% and a grossed-up dividend yield of 6%, including franking credits, in FY26.

2. It’s a defensive stock

A defensive stock is a company that tends to perform steadily, regardless of the stage of the economic cycle. Typically, this is because it provides essential goods or services that people need, regardless of the state of the economy. Telstra falls into this category because, in my view, mobile and internet connections in households and businesses is no longer a luxury but a necessity. 

This means that if investors hold some defensive stocks, such as Telstra shares, in their share portfolio, it can help hedge against potential risk. It may even act as a safety net in the event of a share market crash. In my view, this is a compelling reason to hold Telstra shares in your portfolio. 

3. There’s a good potential upside for Telstra shares

Telstra has heavily invested in its 5G network over the past few years, which has helped the company boost its subscriber base and grow its market share. 

Tradingview data shows that, out of 9 analysts, 3 have a strong buy rating on Telstra shares. The maximum target price for the stock is $5.40 per share, which, at the time of writing, implies a potential 9.76% upside over the next 12 months.

The post 3 reasons Telstra shares are a screaming buy right now! appeared first on The Motley Fool Australia.

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

Fortunately for income investors in this low interest rate environment, there are many options for them on the Australian share market.

Two ASX dividend shares that brokers think are in the buy zone right now are listed below. Here’s what they are recommending to clients:

Flight Centre Travel Group Ltd (ASX: FLT)

Flight Centre could be an ASX dividend share to buy this month.

That’s the view of analysts at Morgans, who believe that it is worth holding very tightly to this travel agent’s shares.

The broker believes that when trading conditions return to normal, the upside could be significant for investors. It said:

FLT’s FY25 result was broadly in line with its recent update. Corporate was weaker than expected while Leisure and Other were stronger. FLT’s guidance for a flat 1H26 was stronger than we expected however it was weaker than consensus. Earnings growth is expected to accelerate in the 2H26 from an improvement in macro-economic conditions and internal business improvement initiatives. We have made minor upgrades to our forecasts.

We are buyers of FLT during this period of short-term uncertainty and share price weakness because when operating conditions ultimately improve, both its earnings and share price leverage to the upside will be material.

As for income, Morgans is expecting fully franked dividends of 51 cents per share in FY 2026 and then 58 cents per share in FY 2027. Based on the current Flight Centre share price of $12.71, this would mean dividend yields of 4% and 4.6%, respectively.

The broker has a buy rating and $15.65 price target on its shares.

GDI Property Group Ltd (ASX: GDI)

Another ASX dividend share that has been given the thumbs up by analysts is GDI Property Group. It is an integrated, internally managed commercial property investor.

Bell Potter is positive on the company and highlights the massive discount that its shares are trading on at present. The broker explains:

No change to our Buy recommendation. GDI continues to trade at a significant -41% discount to NTA which reflects no value for its FM OpCo, and while the Perth office market recovery could be a ‘slow burn’ with early leasing wins working through for GDI, we do still see upside from current levels which drops straight through to FFO gains

In respect to dividends, the broker is forecasting payouts of 5 cents per share in both FY 2026 and FY 2027. Based on its current share price of 65.5 cents, this would mean dividend yields of 7.6% for both years.

Bell Potter has a buy rating and 85 cents price target on its shares.

The post Which ASX dividend shares are brokers recommending to clients? appeared first on The Motley Fool Australia.

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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 Flight Centre Travel Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Owning Sigma Healthcare Ltd (ASX: SIG) shares means gaining exposure to several healthcare businesses, including Chemist Warehouse. After dropping 7% since the November peak, I think it’s worth asking whether the business is a buy-the-dip opportunity.

There are several other businesses in the portfolio, including Amcal and Discount Drug Stores. It’s also a wholesale supplier to other pharmacies.

Chemist Warehouse has pharmacies in several other countries, including New Zealand, Ireland and Dubai. It’s also working on Chinese locations.

Let’s take a look at whether this is a good time to invest in Sigma Healthcare shares.

Expert views on Sigma Healthcare shares

Broker UBS currently has a buy rating on the business because Chemist Warehouse is on course to drive “multi-year double-digit” earnings per share (EPS) growth.

UBS notes that the health and beauty market is growing at an estimated 6% per year, and Chemist Warehouse is expected to deliver continued market share gains.

The broker said that the company’s sales growth, driven by both like-for-like (LFL) sales growth and store network expansion, is delivering operating leverage. The operating profit (EBIT) margin is also benefiting from a rising gross profit margin and the ongoing synergies between Chemist Warehouse and the rest of the Sigma Healthcare business.

UBS believes the Sigma Healthcare share price and relatively high price/earnings (P/E) ratio are justified because of the potential EPS growth and the fact that it’s capital-light, making the risk-reward dynamic attractive.

Analysts at UBS predict Chemist Warehouse’s LFL sales growth could accelerate from 10.9% in FY25 to 13.2% in FY26, then a further 10.2% LFL growth in FY27. After that, high single-digit LFL sales growth is expected for FY30.

Tailwinds that could drive the industry and the company

Sigma Healthcare shares could benefit from both industry tailwinds and ongoing market share gains in the years to come, according to UBS.

The broker said there are multiple industry tailwinds, including:

(1) ageing population; (2) health prioritisation; (3) higher value medicines; and (4) greater category participation and spend per consumer in health & beauty.

On the prospect of a higher market share, UBS said:

Chemist Warehouse is likely to continue to gain share as an everyday retailer given its leadership in price & range, regulatory advantages, compliance and omni-channel capabilities. Chemist Warehouse is forecast to maintain 33 store openings as per its historical average due to: (1) franchisor support; (2) acquisitions; and (3) international growth in existing and possibly new markets.

Price target on Sigma Healthcare shares

UBS currently has a price target of $3.40 on the ASX healthcare share, implying a potential rise of 16% over the next year. The broker is also expecting the company to pay an annual dividend of 4 cents per share in the 2026 financial year.

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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 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.