Category: Stock Market

The ASX dividend shares we’ll explore in this article look cheap to me. They offer big dividend yields, and they’re starting to rise again.

When dividend stocks are trading lower, they can boost their dividend yield. For example, if a business has a 5% dividend yield and its share price falls 10%, then the dividend yield becomes 5.5%. However, if a business has a 5% yield and its share price rises 10%, then the yield drops to 4.55%.

Therefore, it can be a smart strategy to buy quality undervalued dividend stocks before they rise too far in a recovery. With that in mind, here are two ASX dividend shares that I think are passive income opportunities.

Charter Hall Long WALE REIT (ASX: CLW)

This is a real estate investment trust (REIT) that owns commercial property. What I particularly like about this ASX share is that its property portfolio is diversified, and it has a long weighted average lease expiry (WALE).

Its portfolio includes buildings across industrial and logistics, social infrastructure, office, service stations, pubs, agri-logistics and retail.

The WALE of more than 10 years means the business has strong rental income visibility and resilience. Almost all (99%) of the tenants are blue-chip players, including the Australian Government, Telstra Group Ltd (ASX: TLS) and BP.

The ASX dividend share’s rental income is steadily growing, with some leases on fixed annual increases and other contracts linked to inflation.

As we can see on the chart below, the Charter Hall Long WALE REIT share price has climbed around 5% since 26 April. I think this could be a good time to buy while it offers a guided FY24 distribution yield of 7.4%.

APA Group (ASX: APA)

APA owns and operates Australian energy infrastructure worth billions of dollars, including huge gas pipelines, electricity transmission assets, renewable energy generation and gas storage, processing and energy generation.

Impressively, the business has grown its distribution every year for 20 years, meaning it has one of the best records for long-term passive income growth on the ASX, though that’s not guaranteed to continue forever.

APA keeps growing its asset base – it’s working on new pipelines right now. It also recently acquired Alinta Energy Pilbara. This means APA can be a leading provider of renewable energy infrastructure solutions for remote regions in Australia (with miners as major customers).

The ASX dividend share expects to pay a distribution per security of 56 cents in FY24, which is a forward distribution yield of more than 6.2%.

The chart below shows that the APA share price has risen more than 7% in the last month, so now could be a good time to invest.

The post 2 high-yield ASX dividend shares to buy as they bounce appeared first on The Motley Fool Australia.

More reading

• How to choose ASX shares for passive income
• These ASX dividend shares offer 6%+ yields
• Here’s how the ASX 200 market sectors stacked up last week
• Why I’d buy high-yield ASX dividend shares for superannuation in retirement
• 1 compelling ASX dividend share I’d buy for its big yield

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

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

If you’re an Nvidia (NASDAQ: NVDA) or any type of artificial intelligence (AI) investor, then May 22 is a day you must have circled on your calendar. That’s when Nvidia reports Q1 FY 2025 results, which will give investors some clues as to how strong the market is for Nvidia’s class-leading GPUs (graphics processing units).

With how big of a move Nvidia’s stock has made after previous earnings releases, it may be wise to consider buying (or selling) some shares before then. I’ve analyzed Nvidia and come up with three reasons to buy and one to sell. So what should you do before May 22?

1. Reason to buy: Other companies are still talking about AI infrastructure demand

Nvidia’s primary product, the GPU, is vital for AI model development and training. GPUs allow parallel processing, giving them the ability to do multiple tasks at the same time. This is crucial for training AI models, as multiple iterations must occur before an AI model is usable.

Nvidia’s GPUs are the best on the market for AI training, and its customers are buying thousands of them at a time to outfit their servers with the best technology possible.

This caused Nvidia’s initial boom last year, but some investors (including myself) were worried that there would be little demand for more capacity once initial demand is satisfied. However, that isn’t the case.

Meta Platforms raised its long-term capital expenditure guidance to build more computing power to capture the massive AI opportunity it sees. On its conference call, Tesla CEO Elon Musk mentioned that they have about 35,000 Nvidia H100 GPUs active, with another 85,000 slated to be up and running by the end of this year.

The demand for Nvidia’s products is still there, which should bode well for it this quarter.

2. Reason to buy: The stock isn’t as expensive as investors might think

One gripe about Nvidia’s stock has been how expensive it is. That’s true if you look at the trailing-price-to-earnings (P/E) ratio. At 76 times earnings, it could be considered outrageously expensive. But that doesn’t do the stock justice. Nvidia is undergoing a massive transformation and is expected to post another massive quarter of growth (Wall Street projects 250% growth in Q1).

As a result, looking at trailing earnings does investors no good. Instead, they should utilize the forward P/E to value Nvidia.

NVDA PE Ratio (Forward) data by YCharts

At 36 times forward earnings estimates, Nvidia is far from cheap. However, it’s undergoing a massive shift, and this figure could be incredibly off the mark if Nvidia’s growth continues. Furthermore, it’s not far off from Microsoft, which trades at 35 times forward earnings despite growing much slower.

If valuation is a top reason to avoid Nvidia’s stock, you may need to rethink that, as many other stocks trade in a similar range as Nvidia despite not having the growth.

3. Reason to buy: New product launches could drive another demand wave

Although Nvidia may have some of the best products on the market, it isn’t resting on its laurels. Nvidia has launched a few new upgraded GPUs, like the Blackwell GPU. But what investors (and many companies) are waiting for is the H200.

This system is expected to launch in the second quarter of 2024 and is a massive upgrade over the already popular H100. Some companies may be holding out until the H200 is launched to future-proof their servers, as they don’t want to upgrade in a couple of years when the H100s become obsolete.

Although that’s speculation, the H200 will undoubtedly drive new demand, especially from companies willing to pay top dollar to have the best products available.

These are great reasons to buy Nvidia’s stock before its Q1 earnings date, but there’s also a reason to sell.

Reason to sell: Anything short of perfection could ignite a sell-off

While I mentioned that Nvidia’s stock isn’t as expensive as many think, it’s still priced for perfection. If Nvidia misses the mark in any way this quarter, there will likely be a heavy sell-off.

I think that’s unlikely because the heavy demand for Nvidia’s GPUs is still present. However, the company’s execution is unknown until investors see the financials.

Should Nvidia report a less-than-perfect quarter, investors must examine the situation more closely to determine whether the sell-off is warranted or a buying opportunity.

Although the odds of this happening are pretty low, something as simple as a slip-up or a tone on a conference call can make or break a stock.

With how the industry currently looks, I see no problem with buying Nvidia’s stock before Q1 results, as it’s slated to be another quarter of incredibly strong growth. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons to buy Nvidia stock before May 22 (and 1 reason to sell) appeared first on The Motley Fool Australia.

More reading

• What exactly does Nvidia do?
• 2 US artificial intelligence (AI) stocks that could beat Nvidia in the coming decades
• Is it too late to buy Nvidia stock?
• 3 things ASX investors should watch this week
• 5 things to watch on the ASX 200 on Monday

Keithen Drury has positions in Meta Platforms and Tesla. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 recommended Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The ASX-listed exchange-traded funds (ETFs) I’m going to talk about all have very compelling futures.

There are plenty of good businesses on the ASX, but not to the same size and growth potential that we can find overseas. We can’t directly buy these global companies on the ASX, but there are plenty of different ways to get exposure to quality businesses through diversified funds.

With that in mind, these are three of my favourites.

Global X Fang+ ETF (ASX: FANG)

For investors wanting exposure to the big US tech companies like Alphabet, Apple, Amazon.com, Nvidia, Microsoft and Meta Platforms, this could be the best way to do it. These businesses are some of the strongest in the world, with strong balance sheets and incredibly strong market positions.

There are only 10 positions in this ASX ETF portfolio, with the weightings currently ranging between 9.09% to 11.63%, so the allocations are largely even.

Not only are the weightings to those businesses huge, but the FANG ETF actually has a fairly low management fee of 0.35%, compared to an annual fee of 0.48% for the Betashares Nasdaq 100 ETF (ASX: NDQ).

Past performance is not a reliable indicator of future performance with the FANG ETF, but it has returned an average of 23.7% per annum over the past three years. The underlying businesses are doing well.

With the ongoing technology developments, I think the FANG ETF portfolio holdings could continue growing profit for the long term.  

Betashares Global Quality Leaders ETF (ASX: QLTY)

I like owning businesses that meet quality metrics because, over time, I believe those metrics can help a business keep reinvesting profit at a good rate of return. Growing profits can push share prices higher, as that’s normally what investors focus on.

Companies only make it into the QLTY ETF portfolio if they rank well on four metrics: return on equity (ROE), debt-to-capital, cash flow generation ability and earnings stability. Putting those metrics together, it results in a list of very strong investments for the ASX ETF.

At the moment, the biggest positions of the 150-name portfolio are Alphabet, Texas Instruments, Unitedhealth, Coca Cola and Microsoft.

Considering the diversification across different industries (not just technology), I think the QLTY ETF has done very well since inception, with an average return per annum of 14.7%. Again, it’s not guaranteed to keep doing that well, but the quality metrics are compelling.

Betashares Global Cybersecurity ETF (ASX: HACK)

Cybersecurity is one of the most compelling industries because of the ongoing digitalisation around the world and the rise of cybercrime.

Businesses, governments and households need to protect themselves from the bad guys, even in a downturn, so the earnings of the businesses in the portfolio are quite defensive.

The ASX ETF’s portfolio of 30 names includes global leaders and smaller players, including Broadcom, Crowdstrike, Cisco Systems, Palo Alto Networks, Infosys, Darktrace, Cloudflare, Okta, and Zscaler.

Over the past five years, the HACK ETF has delivered an average return per annum of 15.2%, which is impressive in my opinion. If earnings keep growing, then I think this ASX ETF can keep performing.

The post 3 excellent ASX ETFs I think are a buy right now appeared first on The Motley Fool Australia.

More reading

• Why these ASX ETFs could be fantastic buy and hold options
• How much money should I put in one ASX ETF?
• 5 excellent ASX ETFs to buy next week
• 5 ASX ETFs to invest $10,000 into next week
• 4 exciting ASX ETFs for growth investors to buy in May

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. Suzanne Frey, an executive at Alphabet, 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 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 Alphabet, Amazon, Apple, BetaShares Global Cybersecurity ETF, BetaShares Nasdaq 100 ETF, Cisco Systems, Cloudflare, CrowdStrike, Meta Platforms, Microsoft, Nvidia, Okta, Palo Alto Networks, Texas Instruments, and Zscaler. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and UnitedHealth Group 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 Global Cybersecurity ETF and BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, CrowdStrike, Meta Platforms, Microsoft, Nvidia, and Okta. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Fortescue Metals Group Ltd (ASX: FMG) shares closed up 0.5% yesterday, trading for $25.94 apiece.

That was roughly in line with the 0.4% gains posted by the S&P/ASX 200 Index (ASX: XJO).

This came amid an overall positive reaction from investors to the new Federal budget.

And while Fortescue shares didn’t widely outperform the benchmark index yesterday, the ASX 200 miner could catch sustained tailwinds from some of the spending measures unveiled by Treasurer Jim Chalmers.

Among those measures, the budget contains $6.7 billion in tax incentives for green hydrogen production and an additional $1.7 billion to spur innovation in producing green iron production along with low emissions fuels.

And Andrew Forest’s Fortescue is leading its rivals in these sustainable ventures.

As the miner states on its website:

Fortescue is leading the green industrial revolution by developing the technologies to decarbonise hard-to-abate sectors (like our iron ore operations) while building a global portfolio of renewable energy projects.

We’ll help our planet step beyond fossil fuels by harnessing the world’s renewable energy resources to produce renewable electricity, green hydrogen, green ammonia and other green industrial products such as green iron.

How Fortescue shares are embracing green hydrogen

Green hydrogen, if you’re not familiar, is produced by splitting the oxygen atoms from hydrogen atoms in water using sustainable energy sources like solar, wind or thermal.

Gray hydrogen, on the other hand, makes use of gas to split up water molecules.

Green iron, then, is iron produced using green hydrogen as an energy source.

And Fortescue shares already have a sizeable footprint in the green hydrogen space.

In November, the company reported it had approved a Final Investment Decision (FID) on its Phoenix Hydrogen Hub, located in the United States; its Gladstone PEM50 Project, located in Queensland; and its Green Iron Trial Commercial Plant, located in Western Australia.

Commenting on the FID decision and Fortescue’s green iron ambitions at the time, CEO Dino Otranto said, “Fortescue is taking a proactive approach to green iron, including embracing innovative technologies that will help us step away from the use of fossil fuels.”

When the ASX 200 miner reported its half-year results, Fortescue Energy CEO Mark Hutchinson said:

Over the half we also continued to make important progress across the four verticals now established within our Energy business – green energy production, battery technology development, hydrogen systems and capital.

And in April, Fortescue shares got a lift after the miner announced a joint venture with OCP Group.

Hutchinson noted:

The pipeline of green energy projects continues to develop, and Fortescue entered a landmark joint venture with OCP Group in Morocco which aims to supply green hydrogen and ammonia for use as sources of green energy and in the manufacture of carbon-neutral and customised fertilisers.

With Fortescue shares having gotten a head start over much of the competition in this space, the ASX 200 miner looks well-placed to benefit from the Federal budget’s multi-billion-dollar green hydrogen and green iron tax incentives.

The post How Fortescue shares could gain from the Federal budget appeared first on The Motley Fool Australia.

More reading

• Which ASX shares could be set to benefit from the federal budget?
• What the federal budget means for interest rates and ASX shares
• 5 things to watch on the ASX 200 on Wednesday
• Should you buy Fortescue shares for that fat 8% dividend yield?
• Here are 2 top ASX 200 shares I’d buy now for passive income

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.

Income investors have a lot of options on the Australian share market.

So much so, it can be hard to decide which ASX dividend stocks to buy above others.

But don’t worry, to narrow things down I have picked out three options that are rated highly by brokers right now. They are as follows:

Eagers Automotive Ltd (ASX: APE)

Bell Potter thinks that this automotive retailer could be a top ASX dividend stock to buy this month.

According to a note from this week, the broker has reiterated its buy rating on its shares with a slightly trimmed price target of $14.75. This is notably higher than its current share price, which means market-beating returns could be on the cards.

In addition, Bell Potter expects Eagers Automotive to pay 74 cents per share fully franked dividends in FY 2024, FY 2025, and FY 2026. Based on its current share price of $12.50, this represents 5.9% dividend yields each years.

Inghams Group Ltd (ASX: ING)

Over at Morgans, its analysts think that Inghams could be an ASX dividend stock to buy. It is Australia’s leading poultry producer.

The broker believes that its shares are cheap at current levels. Especially for a company that has a market leadership position and looks set to provide investors with big dividend yields in the near term.

Morgans currently has an add rating and $4.40 price target on the company’s shares.

As for dividends, the broker is forecasting fully franked dividends of 22 cents per share in FY 2024 and then 23 cents per share in FY 2025. Based on the current Inghams share price of $3.87, this equates to dividend yields of 5.7% and 5.95%, respectively.

Sonic Healthcare Limited (ASX: SHL)

Another ASX dividend stock that Morgans is positive on is Sonic Healthcare. It is a leading medical diagnostics company with operations across the world.

The broker believes that now could be a good time to pounce on the company’s shares after a tough period. It highlights that “management remains confident in a turnaround, outlining numerous near/medium term drivers supporting underlying profitability and reflected in guidance, which we view as achievable.”

Morgans has an add rating and $34.94 price target on its shares.

As for income, the broker is forecasting dividends per share of $1.04 in FY 2024 and then $1.16 in FY 2025. Based on the current Sonic share price of $26.69, this will mean yields of 3.9% and 4.3%, respectively.

The post Guess which ASX dividends stocks analysts think are top buys appeared first on The Motley Fool Australia.

More reading

• Buy this ASX 200 share for a 20%+ return
• Top brokers name 3 ASX shares to buy today
• With $1,000 to invest, should I buy ASX growth stocks or income shares?
• 5 things to watch on the ASX 200 on Wednesday
• How to choose ASX shares for passive income

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 Eagers Automotive Ltd and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

BHP Group Ltd (ASX: BHP) shares are a popular option for passive income investors.

That’s because the mining giant returns a good portion of its bumper profits each year to its shareholders. This often sees tens of billions of dollars lining shareholders’ pockets.

But what sort of passive income could be coming your way if you were to buy BHP shares today? Let’s have a look and see what could be on the cards for investors.

Passive income from BHP shares

Let’s imagine that you were to pick up 300 shares in the Big Australian.

With BHP shares currently changing hands for $44.09, this would mean an investment of $13,227 is needed.

This is a fairly large investment, but would it be worth it?

Goldman Sachs appears to believe it could be. Firstly, the broker currently has a buy rating and $49.00 price target on its shares.

This means that if the mining giant’s shares were to rise to that level, your 300 units would have a market value of $14,700. That’s approximately 11% or $1,473 greater than your original investment, which means you are off to a great start.

Now let’s look at what passive income BHP shares could provide for investors.

According to a note out of Goldman Sachs, its analysts are forecasting a fully franked US$1.45 (A$2.17) per share dividend in FY 2024. This means that those 300 units would generate passive income of A$651.

But the dividends won’t stop there, so let’s keep going and see what future years could bring.

As I covered here recently, Goldman then expects a fully franked US$1.26 (A$1.88) per share dividend in FY 2025. This will mean passive income of A$564 for that year.

Moving on, in FY 2026 the broker expects another small cut to US$1.22 (A$1.82) per share, fully franked. If this proves accurate, it will lead to passive income of A$546 for investors.

Goldman then expects fully franked dividends per share of US$1.12 (A$1.67) in FY 2027 and US$1.07 (A$1.60) in FY 2028. This would generate income of A$501 and A$480, respectively.

Commenting on its buy recommendation, the broker said:

BHP is currently trading at ~6.0x NTM EBITDA, (25-yr average EV/EBITDA of ~6-7x) vs. RIO on ~5.5x. BHP is trading at 0.9x NAV (A$49.2/sh), vs. RIO at ~0.9x NAV. That said, we believe this premium vs. peers can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers), high returning copper growth, and lower iron ore replacement & decarbonisation capex.

The post How much passive income would I make from 300 BHP shares? appeared first on The Motley Fool Australia.

More reading

• Why BHP, Boss Energy, Domino’s, and Renescor shares are racing higher
• What the federal budget means for interest rates and ASX shares
• Buying BHP shares? Here’s what’s happening with the Anglo American takeover
• Buy BHP and these ASX dividend stocks
• Why more ASX mining shares could soon turn to takeover bids

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.

It has been a busy period for the banking sector, with ANZ Group Holdings Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), and Westpac Banking Corp (ASX: WBC) all releasing their latest updates this month.

The market reaction to the results has been overwhelmingly positive, with CBA and the other big four banks seeing their shares charge higher (before some traded ex-dividend).

Let’s now see what analysts at Wilsons are saying about the banks after it ran the rule over their results and outlooks.

What is Wilsons saying about ANZ, CBA, NAB, and Westpac shares?

Unfortunately, the broker hasn’t seen anything in the results to change its view on the banks. It revealed that its “sector view remains unchanged with the Focus Portfolio retaining an underweight exposure to sector.”

Wilsons acknowledges that the “banks reported sound results for 1H24, which were generally a touch ahead of consensus expectations across key line items.” However, this doesn’t hide the fact that “the sector’s medium-term earnings outlook still remains challenged.”

It also feels that CBA shares (and the rest of the big four) look overvalued based on current multiples and this challenging outlook. The broker said:

Following modest forward upgrades, consensus forecasts still point to negative EPS growth for the ASX 200 Banks Index in both FY24e and FY25e. In this context, the sector’s valuation premium relative to history remains excessive and unjustified at the headline level, albeit with pockets of relative value within the sector.

What else did the broker say?

Wilsons notes that the banks are returning capital with share buybacks. However, it has described this as a “temporary sugar hit.” It also believes it “fails to address the still lacklustre medium and long-term EPS growth outlook facing the sector.”

The broker then summaries its view on CBA and the rest of the banks’ shares. It said:

In the context of a weak earnings growth outlook, on the whole bank valuations remain highly uncompelling. The ASX 200 Banks Index trades on a forward PE multiple of 16x (skewed by CBA where we have zero weight), representing a ~13% premium to the 5-year average, and a forward price to book (PB) ratio of 1.6x, which is 14% above the 5-year average.

The current sector valuation (forward PE of 16x) implies the market is pricing in ~20% EPS growth in FY25 (if we assume a mean reversion to the 10-year avg PE of ~13x occurs) , compared to consensus of -1%. This is highly unlikely to eventuate in our view without a dramatic shift in RBA policy rate expectations and the economic outlook, demonstrating the extent of the sector’s current valuation excesses at current levels.

The post Here’s what Wilsons is saying about ANZ, CBA, NAB, and Westpac shares appeared first on The Motley Fool Australia.

More reading

• Is the CBA share price heading back to $100?
• If I buy 1,000 Westpac shares, how much passive income will I receive?
• Inherited a substantial sum of money? Here’s how I’d spend it (including the ASX stocks I’d buy)
• How ASX growth shares can become top dividend stocks
• Here’s the ANZ dividend forecast through to 2026

Motley Fool contributor James Mickleboro has positions in Westpac Banking Corporation. 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 S&P/ASX 200 Index (ASX: XJO) healthcare stock Pro Medicus Ltd (ASX: PME) have performed incredibly well. It’s up more than 90% in 12 months, and over 480% in five years, as we can see on the chart below. It hit a new all-time high of $119.09 during Wednesday’s trading, rising by around 3% by the end of the day.

After such an incredible performance, investors may be wondering if this IT healthcare stock is a buy or not.

Why is the ASX 200 healthcare stock soaring?

The business continues to deliver on its strategy.

Pro Medicus is one of the most profitable businesses on the ASX, with an earnings before interest and tax (EBIT) margin of 66%. That means around two-thirds of revenue is turning into EBIT. The net profit after tax (NPAT) margin was 49% in the FY24 first-half result, so around half of the new revenue is turning into NPAT.

Impressively, margins are continuing to climb as the company’s footprint increases. Pro Medicus says it has a highly scalable offering, with a contained cost base.

It’s delivering excellent revenue growth as it wins more contracts in Europe and North America.

I’ll mention its biggest contract won in FY24 to date – in September 2023; it won a $140 million contract (over 10 years) from BaylorScott&White Health. It has also won a $24 million contract over seven years, a $16 million contract over eight years and a $20 million contract over eight years.

When you add those new contracts to the ASX 200 healthcare stock’s previously-announced revenue, at the margins it’s earning, the company is clearly on track for strong profits over the rest of this decade.

Is it too late to buy?

Pro Medicus is clearly one of the best businesses on the ASX.

The company’s service offers several benefits to its clients, including “significant IT and infrastructure savings, improved physician engagement, unparalleled increase in radiologist efficiency, delivers superior value proposition and greater clinical accuracy.”

It’s aiming to grow in a number of different ways including winning new clients, seeing transaction growth from existing clients, delivering new product offerings, extending to new geographical markets and leveraging its research and development capability to introduce the next generation of products.

Management says there is a very significant addressable runway, and its pipeline is strong.

The question is – what valuation makes sense for the ASX 200 healthcare stock? According to the forecasts on Commsec, the Pro Medicus share price is valued at 154x FY24’s estimated earnings and 93x FY26’s estimated earnings. That’s a very high earnings multiple, particularly when interest rates are still so high.

Profit is growing strongly, but it’s difficult to say what the right price is. I’d be exceptionally happy if I were a long-term shareholder. I’m just not sure what a fair earnings multiple is for the business.

According to Commsec, the business currently has four sell ratings, five holds, and six buys. The average rating is a hold, but there are a range of views.

The post This ASX 200 healthcare stock just hit an all-time high: Is it too late to buy? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• 2 of the best growth-focused ASX shares to consider buying in May
• Aussie investors: 3 ASX shares to buy and hold forever
• Here are the top 10 ASX 200 shares today
• 4 ASX shares exposed to the ‘largest technological change ever seen’

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

On Wednesday, the S&P/ASX 200 Index (ASX: XJO) returned to form and pushed higher. The benchmark index rose 0.35% to 7,753.7 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to rise again

The Australian share market looks set for another good session on Thursday following a strong night on Wall Street after US inflation came in lower than expected. According to the latest SPI futures, the ASX 200 is expected to open the day 42 points or 0.55% higher this morning. In the United States, the Dow Jones was up 0.9%, the S&P 500 rose 1.2%, and the Nasdaq jumped 1.4%. The S&P 500 closed at a record high.

Oil prices charge higher

ASX 200 energy shares such as Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a good session after oil prices stormed higher overnight. According to Bloomberg, the WTI crude oil price is up 1.1% to US$78.88 a barrel and the Brent crude oil price is up 0.7% to US$82.95 a barrel. Oil prices pushed higher amid news that US stockpiles have fallen.

Aristocrat Leisure results

The Aristocrat Leisure Limited (ASX: ALL) share price will be one to watch on Thursday when the gaming technology company releases its half-year results. According to a note out of Macquarie, its analysts are expecting Aristocrat Leisure to achieve consensus estimates. This will mean earnings growth of approximately 6% year on year.

Gold price jump

It looks set to be a very good session for ASX 200 gold shares such as Newmont Corporation (ASX: NEM) and Northern Star Resources Ltd (ASX: NST) after the gold price charged higher again overnight. According to CNBC, the spot gold price is up 1.4% to US$2,392.7 an ounce. Traders were bidding the precious metal higher after softer than expected inflation in the United States bolstered the prospect of rate cuts from the US Federal Reserve.

JB Hi-Fi shares downgraded

The JB Hi-Fi Ltd (ASX: JBH) share price could be overvalued according to analysts at Goldman Sachs. This morning, the broker has downgraded the retail giant’s shares to a sell rating with a new $50.00 price target (from $56.50). This implies potential downside of approximately 14% from current levels. Goldman notes that the company is facing “stronger competition on JBH AU from several fronts including expanding range at Amazon, recovery of execution from HVN, and intensifying competition from Officeworks.”

The post 5 things to watch on the ASX 200 on Thursday appeared first on The Motley Fool Australia.

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• Top brokers name 3 ASX shares to buy today
• What the federal budget means for interest rates and ASX shares
• 2 of the best ASX 200 dividend giants to buy in May

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 James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Goldman Sachs Group, and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Amazon and Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Liontown Resources Ltd (ASX: LTR) shares have been having a rough time of late.

So much so, on a 12-month basis, the lithium developer’s shares have halved in value.

While this is disappointing for shareholders, could it be a buying opportunity for the rest of us?

The team at Bell Potter appears to believe this is the case and is tipping the company’s shares to roar materially higher from current levels.

Where are Liontown shares heading?

According to a recent note out of Bell Potter, its analysts have a speculative buy rating and $1.85 price target on its shares.

Based on the latest Liontown share price of $1.40, this implies potential upside of 32% for investors over the next 12 months.

To put that into context, a $20,000 investment would grow to be worth approximately $26,400 if Bell Potter is on the money with its recommendation. Though, it is worth highlighting that the broker’s speculative rating means it is a high risk, high reward option. This makes it unsuitable for investors with a low to normal risk tolerance.

Why is the broker positive?

Bell Potter thinks very highly of the company’s wholly owned Kathleen Valley (KV) lithium project in Western Australia.

This project, which is due to commence production in the middle of the year, has been optimised for an initial 3 Mtpa, producing approximately 500,000 tpa of spodumene concentrate. It also has a 4Mtpa expansion planned in year six, which aims to deliver approximately 700,000 tpa spodumene concentrate.

The broker notes that the project is highly strategic and should be fully funded through to free cash flow generation. It said:

LTR’s 100% owned KV lithium project remains highly strategic in terms of its stage of development, long mine life and location. LTR has offtake contracts with top tier EV and battery OEMs (Ford, LG Energy Solution and Tesla). Hancock Prospecting has a 19.9% interest in LTR. Under our modelled assumptions which includes the drawdown of the $550m debt package and repayment of Ford debt, and under a more conservative spot price scenario, we expect that LTR is fully funded to free cash flow. LTR is an asset development company; our Speculative risk rating recognises this higher level of risk.

All in all, Bell Potter appears to believe this makes Liontown shares a good option for investors (with a high risk tolerance) that are looking for exposure to the lithium industry before it rebounds.

The post Could Liontown shares roar 30%+ higher? appeared first on The Motley Fool Australia.

More reading

• What the federal budget means for interest rates and ASX shares
• Why these ASX mining shares have ‘got some huge advantages’: Chalmers
• These are the 10 most shorted ASX shares
• Liontown shares charge higher on lithium project update
• Here are the top 10 ASX 200 shares 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 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.