The VHM Limited (ASX: VHM) share price is tumbling as it floats on the Aussie bourse on Monday.

The rare earths and mineral sands developer’s goal to become a global supplier of critical minerals caught the attention of many market watchers prior to its listing.

Also likely raising eyebrows is Aussie billionaire and Mineral Resources Ltd (ASX: MIN) boss Chris Ellison’s majority holding. Ellison boasts a 9.14% stake at the time of listing.

Right now, excited investors can get their hands on VHM shares for $1.20 each. That’s 11.1% lower than the company’s initial public offering (IPO) offer price of $1.35 apiece.  

Let’s take a closer look at the newest rare earths and minerals sands stock gracing the ASX.

VHM share price rockets as it hits the ASX after IPO

Those who got in on the VHM IPO will likely be disappointed this afternoon as the company’s share price slumps 11% on its ASX float.

It raised approximately $30 million in an oversubscribed IPO, offering new shares for $1.35 apiece.

That left the company expecting a market capitalisation of $266 million at its offer price.

What does VHM do?

VHM is behind the Goschen rare earths and mineral sands project in Victoria – dubbed by chair Donald Runge a “fast-emerging tier one” asset. Runge continues, via the company’s prospectus:

As the world continues to transition to renewable and environmentally friendly products like electric vehicles, the gap between increasing demand for rare earth and mineral sands and declining supply is anticipated to widen.

VHM is seeking to capitalise on these favourable market conditions and establish itself as a world-leading producer and supplier of critical minerals.

The project has a rare earth deposit of 413,107 tonnes of total rare earth oxide and an accompanying mineral sands resource.

Its definitive feasibility study was completed in March 2022.

The $30 million raised through the company’s IPO will fund to a final investment decision for the project’s first phase. That’s expected in the second half of this year.

After that, its first production is targeted for early 2025.

VHM recently agreed to provide Chinese rare earths giant Shenghe with around 60% of the project’s nominal production rate.

It’s also working on tests for a hydrometallurgy circuit to further refine rare earths produced at the project.

The post VHM share price plummets 11% following $30m IPO appeared first on The Motley Fool Australia.

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• Why is the BHP share price having such a strong start to the week?
• 4 ASX lithium stocks moving and shaking on Monday
• How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago?

Motley Fool contributor Brooke Cooper 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 BHP Group Ltd (ASX: BHP) share price has continued its ascent on Monday.

In morning trade, the mining giant’s shares were up 2% to $48.43.

When the BHP share price reached that level, as you can see below, it had risen an impressive 28% in six months.

Why is the BHP share price pushing higher again?

Investors have been buying the Big Australian’s shares on Monday for a couple of reasons.

The first is a strong session for ASX shares following an even stronger night of trade on Wall Street on Friday. Investors were flooding back into the market after wage inflation was softer than expected. This has sparked hopes that inflation could be easing and rates won’t have to rise as much as feared.

In addition, investors have been buying ASX mining shares recently amid optimism over the reopening of China from the pandemic.

With Chinese economic growth slowing markedly, the market is betting on some major stimulus to support its recovery in 2023. This could lead to an uptick in demand for the commodities that BHP produces such as copper and iron ore, which could ultimately underpin strong commodity prices.

It is for the same reason that the Rio Tinto Ltd (ASX: RIO) share price has climbed along with BHP shares in recent months, as shown below.

Can BHP’s shares keep rising?

As things stand, most brokers appear to believe the BHP share price is trading a little beyond fair value at the current level.

For example, Morgans, Morgan Stanley, and Goldman Sachs have the equivalent of hold ratings with price targets of $44.80, $42.55, and $42.90, respectively.

However, one broker that sees scope for BHP’s shares to rise slightly from here is Macquarie. Its analysts currently have an outperform rating and $50.00 price target on them.

Based on the latest BHP share price, this implies potential upside of 3%. But if you add in the ~$2.88 per share fully franked dividend the broker is forecasting in FY 2023, the total return stretches to 9%.

Though, if commodity prices strengthen because of Chinese demand, it is possible that brokers will upgrade their earnings (and dividend) estimates and price targets accordingly. Time will tell if that is the case.

The post Why is the BHP share price having such a strong start to the week? 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 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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There’s electricity in the air this morning as a handful of ASX lithium shares bask in the excitement of recent acquisition developments.

At the time of writing, the broad S&P/ASX 200 Index (ASX: XJO) is enjoying a green start to the week — rising 0.99% to 7,179.7 points. The sector feeling the most love so far today is materials, catching a 0.66% boost with the Fortescue Metals Group Limited (ASX: FMG) share price being the odd one out.

However, four ASX lithium shares are making some of the biggest waves today. Let’s explore the exact details behind the moves.

IGO makes a $136 million offer for growth

An ASX lithium giant, IGO Limited (ASX: IGO), has made it clear this morning it is looking for additional lithium resources.

As previously reported, the $10.8 billion Australian miner — in conjunction with its joint venture partner Tianqi Lithium — has offered 50 cents per share to acquire Essential Metals Ltd (ASX: ESS).

Following the announcement, shares in Essential Metals have sprung to life, jumping nearly 38% to 47.5 cents apiece. Meanwhile, IGO shares are being pushed 1.9% to the upside today, now trading hands at $14.28.

The $136 million deal would value the Pioneer Dome Project owner at a 45% premium to its Friday closing price.

Mineral Resources doubles down on gas

A release by Mineral Resources Ltd (ASX: MIN) on Friday afternoon confirmed it had taken a 16.35% stake in Warrego Energy Ltd (ASX: WGO). The Mineral Resources share price is catching a 3.1% rally today, lifting to $86.14.

Notably, MinRes’s financial interest in Warrego comes amid a bidding battle for the gas exploration company. Gina Rinehart’s Hancock Group has been duking it out with Strike Energy to try and secure a winning bid on Warrego.

While Mineral Resources is mostly known for its mining services, iron ore, and lithium businesses, it also dabbles in energy. In fact, the investment in Warrego follows a $403 million off-market takeover bid of Norwest Energy NL (ASX: NWE) made in December.

ASX lithium share buying up projects

Barely a month into its listed life and Patriot Lithium Ltd (ASX: PAT) is already looking to spread its wings. Shares in the lithium explorer are up 5.3% today after announcing the acquisition of three prospective land packages in Ontario.

According to the release, the land totals 909sq km in the greenstone belts of the Archean Superior Craton of Ontario. These include the Gorman Project, the Forester Project, and the Birkett Project.

The post 4 ASX lithium stocks moving and shaking on Monday appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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 Vanguard Australian Shares Index ETF (ASX: VAS) is a rather special exchange-traded fund (ETF) on the ASX. For one, it’s the only ASX ETF that tracks the S&P/ASX 300 Index (ASX :XKO) rather than the more popular S&P/ASX 200 Index (ASX: XJO).

But more importantly, the Vanguard Australian Shares ETF is, by a mile, the ASX’s most popular ETF by funds under management.

So given the importance of this fund to ASX investors, it’s a good opportunity to examine how its underlying portfolio has changed over the past 12 months.

How has the Vanguard Australian Shares ETF portfolio changed over the past year?

Vanguard hasn’t yet updated its holdings beyond 30 November 2022. So we’ll use that as a benchmark.

12 months ago (as of 30 November 2021), this ETF had the following 10 ASX 300 shares as its top holdings:

1. Commonwealth Bank of Australia (ASX: CBA) with a fund weighting of 7.47%
2. CSL Limited (ASX: CSL) with a weighting of 6.56%
3. BHP Group Ltd (ASX: BHP) with a weighting of 5.45%
4. National Australia Bank Ltd (ASX: NAB) with a weighting of 4.23%
5. Australia and New Zealand Banking Group Ltd (ASX: ANZ) with a weighting of 3.57%
6. Westpac Banking Corp (ASX: WBC) with a weighting of 3.54%
7. Macquarie Group Ltd (ASX: MQG) with a weighting of 3.27%
8. Wesfarmers Ltd (ASX: WES) with a weighting of 3.03%
9. Woolworths Group Ltd (ASX: WOW) with a weighting of 2.32%
10. Telstra Group Ltd (ASX: TLS) with a weighting of 2.27%

Let’s compare those to how the Vanguard Australian Shares Index ETF’s holdings looked as of 30 November 2022:

1. BHP Group Ltd with a weighting of 10.37%
2. Commonwealth Bank of Australia with a fund weighting of 8.29%
3. CSL Limited with a weighting of 6.51%
4. National Australia Bank Ltd with a weighting of 4.51%
5. Westpac Banking Corp with a weighting of 3.75%
6. Australia and New Zealand Banking Group Ltd with a weighting of 3.33%
7. Woodside Energy Group Ltd (ASX: WDS) with a weighting of 3.18%
8. Macquarie Group Ltd with a weighting of 2.92%
9. Wesfarmers Ltd with a weighting of 2.48%
10. Telstra Group Ltd with a weighting of 2.07%

So you can see that, while some of the players have been shuffled, the Vanguard Australian Shares ETF song largely remains the same.

What are some of the changes?

Perhaps the largest change over these 12 months is the entry of Woodside Energy Group, displacing ASX 300 blue chip stalwart Woolworths from the top ten shares. This reflects the merger between the old Woodside Petroleum and BHP’s oil division that was finalised in the middle of last year.

This resulted in Woodside becoming a much larger company and thus getting a boost in representation in this ASX ETF.

Speaking of BHP, you’ll also notice that the Big Australian shot up from the third-largest holding 12 months ago to the top spot it presently occupies. This is the result of BHP’s ‘unification’ program implemented at the start of 2022.

BHP rehomed its London-listed shares back to the ASX, also resulting in an almost-doubled presence on the local market.

But otherwise, the major holdings in the Vanguard Australian Shares ETF are fairly similar to where they were 12 months ago. But who knows what 2023 will bring for investors in the ASX’s most popular ETF?

The post How different is the Vanguard Australian Shares Index ETF (VAS) now compared to a year ago? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in CSL, National Australia Bank, Telstra Group, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has positions in and has recommended Telstra Group and Wesfarmers. The Motley Fool Australia has recommended Macquarie Group and Westpac Banking. 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 Argosy Minerals Limited (ASX: AGY) share price was a strong performer in 2022.

During the 12 months, as you can see below, the lithium producer’s shares rose an impressive 78%.

Can the Argosy Minerals share price keep rising?

The good news for investors is that one leading broker believes Argosy Minerals shares can rise further in 2023.

According to a recent note out of Canaccord Genuity, its analysts have a speculative buy and 85 cents price target on the Argentina-based lithium producer’s shares.

Based on the current Argosy Minerals share price of 65.2 cents, this implies potential upside of 30% for investors over the next 12 months.

What did the broker say?

Canaccord Genuity highlights that Argosy Minerals recently produced its first battery quality lithium carbonate during commissioning at its 2,000tpa Rincon operation. It believes the production of 250kg of 99.76% lithium carbonate “represents a significant validation of its production process.”

And while the broker acknowledges that there is still work to be done, it has been pleased with its progress so far. The broker commented:

The company must now ramp up to nameplate capacity over the first half of 2023 and maintain quality metrics. However, it marks the transition of AGY becoming a producer of lithium carbonate, one of only two ASX-listed companies to do so to date.

Canaccord Genuity also provided investors with an idea of what to expect from the company’s financials in 2023 in 2024. It is forecasting EBITDA of $50 million on revenue of $68.8 million in FY 2023 and EBITDA of $62.5 million on revenue of $82.7 million in FY 2024.

Though, the broker sees scope for higher earnings if lithium prices don’t soften as much as it is forecasting. It explained:

We have trimmed our sales number for 2023E leading to a 25% fall in EBITDA to A$50m. […] If we were to run a spot price of US$67,350/t as a scenario, our 2023E EBITDA would lift 66% to A$83m and our 2024E EBITDA would lift 117% to A$137m.

All in all, the broker appears to see Argosy Minerals as a top option in the lithium space for investors with a high tolerance for risk.

The post This ASX 300 lithium share boomed in 2022, and still has 30% upside: broker 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 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 Core Lithium Ltd (ASX: CXO) share price is roaring higher amid news the company is relocating west.

The lithium favourite is shifting its head office from Adelaide to Perth in a bid to better its foothold in the mining industry. It has also welcomed two new executives to its ranks.

Right now, the Core Lithium share price is soaring 4.56%, trading at $1.26. And it’s not the only lithium stock posting notable moves today.

The IGO Ltd (ASX: IGO) share price is up 1.5% after the company announced its plan to partially take over fellow lithium stock Essential Metals Ltd (ASX: ESS). Meanwhile, shares in Mineral Resources Ltd (ASX: MIN) are gaining 2.8% amid the revelation of its new 16% stake in takeover target Warrego Energy Ltd (ASX: WGO).

For comparison, the S&P/ASX 200 Index (ASX: XJO) has risen 0.88% at the time of writing, while the company’s home sector – the S&P/ASX 200 Materials Index (ASX: XMJ) – has lifted 1.39%.

Let’s take a closer look at the latest from the ASX 200 lithium favourite.

Core Lithium announces move to Western Australia

The Core Lithium share price is surging on Monday. Its gain follows news the company will move its headquarters to Perth – dubbing the Western Australian capital “the corporate centre of Australia’s lithium industry”.

The shift is expected to provide better access to mining services providers and a larger talent pool while retaining a direct route to the company’s Finniss Project, located near Darwin.

A Perth-based office is expected to be established by mid-2023, with the Adelaide headquarters tipped to close by the end of the year.

Core Lithium CEO Gareth Manderson commented on the move, saying:

Perth has become Australia’s lithium hub … Relocating the corporate head office to Perth makes sense for Core and forms part of our broader strategy to build a sustainable, value-driven lithium business.

All of the company’s Adelaide-based employees have been given the option to relocate.

The ASX 200 lithium favourite has appointed Melissa Winks as executive general manager of sustainability – a newly created position that reflects the company’s “commitment to sustainable practices”.

Additionally, it announced Andrew Forman would join the company as interim chief financial officer (CFO).

Forman will work alongside current CFO Simon Iacopetta to complete a handover before his February appointment. Iacopetta announced his intent to step down in November.

The company expects to appoint a permanent Perth-based CFO by mid-2023.

Core Lithium share price snapshot

The Core Lithium share price was one of the ASX 200’s best performers of 2022. And, by the looks of things, 2023 could be another big year for the stock.

The lithium share rose 73% over the course of last year. If that wasn’t enough, it’s gained another 23% since 30 December.

For comparison, the ASX 200 fell around 5% last year and has lifted 1% since the final close of 2022.

The post Why is the Core Lithium share price soaring 4% on Monday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 Essential Metals Ltd (ASX: ESS) share price is rocketing higher on Monday morning.

At the time of writing, the lithium explorer’s shares are up 40% to 48.5 cents.

As you can see below, this is the highest level the Essential Metals share price has traded at since October.

Why is the Essential Metals share price rocketing higher?

Investors have been scrambling to buy the company’s shares this morning after it accepted a takeover offer from Tianqi Lithium Energy Australia.

Tianqi Lithium Energy Australia is a joint venture lithium business owned by lithium giants Tianqi Lithium and IGO Limited (ASX: IGO).

According to the release, the parties have entered into a scheme implementation agreement that will see Tianqi Lithium Energy Australia acquire 100% of Essential Metals for 50 cents per share in cash via a scheme of arrangement.

This represents a 45% premium to the Essential Metals share price at Friday’s close and values the company at $136 million on a fully diluted basis.

The Essential Metals board of directors has unanimously recommended that shareholders vote in favour of the scheme, and each director intends to vote their shares in favour of the scheme. This is in the absence of a superior proposal and subject to the independent expert’s report

Why acquire Essential Metals?

Essential Metals is a lithium exploration company which owns 100% of the Pioneer Dome Project in Western Australia.

It is one of only 14 JORC compliant spodumene lithium resources in Australia, with a defined JORC resource of 11.2 Mt @ 1.16% Li2O. The company also holds several other interests in early-stage exploration projects across lithium, nickel and gold.

IGO’s acting CEO, Matt Dusci, explained the rationale for acquiring the company. He said:

Both IGO and TLC are committed to progressing and growing our lithium joint venture business. The ESS transaction provides an opportunity to accelerate lithium exploration to bring new resources to production. It also complements the significant growth opportunities within the TLEA [Tianqi Lithium Energy Australia] business which include the continued expansion of the Greenbushes operation, the successful ramp up Train 1 of the lithium hydroxide facility at Kwinana and progressing towards the financial investment decision for Train 2.

We look forward to supporting TLEA with future work programs over the ESS assets, as the joint venture seeks to bring new resources to production to address the market deficit of raw materials critical for clean energy transition.

The post Why is ASX lithium share Essential Metals exploding 40% today? 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 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 Woodside Energy Group Ltd (ASX: WDS) share price had a ripper 2022. Looking further back, however, the stock has underperformed over the last 10 years.

If an investor were to have bought $1,000 worth of the oil and gas giant’s stock in January 2013, they likely would have walked away with 29 shares and $7 change, paying around $34.23 apiece.

Today, the Woodside share price is trading at $34.61 – just 1.1% higher than it was 10 years ago. Thus, the figurative parcel would currently be valued at $1,003.69.

. 

For comparison, the S&P/ASX 200 Index (ASX: XJO) is around 50% higher than it was in January 2013.

But could the dividends offered to those invested in Woodside over that time have made up for its share price’s sluggishness? Let’s take a look.

How much have Woodside shares paid in dividends in 10 years?

Here are all the dividends offered by Woodside over the last 10 years, rounded to the nearest cent:

Woodside dividends’ pay date	Type	Dividend amount
October 2022	Interim	$1.60
March 2022	Final	$1.46
September 2021	Interim	41 cents
March 2021	Final	15 cents
September 2020	Interim	36 cents
March 2020	Final	83 cents
September 2019	Interim	53 cents
March 2019	Final	$1.27
September 2018	Interim	73 cents
March 2018	Final	63 cents
September 2017	Interim	62 cents
March 2017	Final	65 cents
September 2016	Interim	45 cents
April 2016	Final	60 cents
September 2015	Interim	92 cents
March 2015	Final	$1.84
September 2014	Interim	$1.19
March 2014	Final	$1.15
September 2013	Interim	93 cents
May 2013	Special	61 cents
April 2013	Final	64 cents
Total:		$17.57

As the chart above shows, Woodside stock has paid out a total of $17.57 per share in dividends over the last 12 years.

That means our imagined parcel would have yielded $509.53 in passive income over its life.

It also means a person who bought $1,000 of Woodside shares for $34.23 apiece in 2013 might have recognised a 52.4% return on investment (ROI), including both share price gains and dividends.

Additionally, all offerings handed out by the ASX 200 company in that time have been fully franked. That means some shareholders might have recognised taxation benefits.

Woodside shares currently offer an 8.8% dividend yield.

The post Bought $1,000 of Woodside shares 10 years ago? Here’s how much dividend income you’ve received appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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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At the start of each week, I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) continues as the most shorted ASX share with short interest of 14.7%, which is up week on week. Short sellers may believe that investors are too optimistic about Flight Centre’s recovery from the pandemic. Particularly given revenue margin pressures.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest rebound to 13%. This betting technology company’s shares have been crushed over the last 12 months, but short sellers don’t appear to believe they have bottomed yet.
• Perpetual Limited (ASX: PPT) has 12.9% of its shares held short, which is up week on week. The fund management industry is going through a difficult period right now as rates rise.
• Megaport Ltd (ASX: MP1) has seen its short interest ease slightly to 11.1%. This network as a service operator’s shares have come under pressure in recent months amid concerns over the capital intensive nature of its business and its cash flow generation.
• Sayona Mining Ltd (ASX: SYA) has 10.5% of its shares held short, which is up week on week. Short sellers may be targeting Sayona Mining due to concerns that lithium prices could have peaked.
• Core Lithium Ltd (ASX: CXO) has short interest of 8.4%, which is flat since last week. Production delays and falling lithium prices may be behind this.
• Breville Group Ltd (ASX: BRG) has seen its short interest edge lower to 7.4%. Short sellers may be going after this appliance manufacturer due to fears that consumer spending on household goods could soften in 2023 due to housing market weakness and the cost of living crisis.
• Zip Co Ltd (ASX: ZIP) has seen its short interest remain flat at 7.4%. This high level of short interest may have been driven by concerns over Zip’s high debt and doubts over its ability to become profitable in the near term.
• Lake Resources N.L. (ASX: LKE) has short interest of 7.2%, which is down week on week. One short seller, J Capital, is alleging that this lithium developer is having issues producing battery grade lithium at scale.
• Chalice Mining Ltd (ASX: CHN) has seen its short interest ease to 7.1%. Short sellers may be targeting Chalice due to delays to the mineral exploration company’s scoping study.

The post Here are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• What’s the outlook for ASX 200 lithium shares in 2023?
• Can ASX tech shares rise from the ashes in 2023?
• The Sayona Mining share price exploded 46% in 2022. Can it keep up the momentum this year?
• 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 positions in and has recommended Betmakers Technology Group, Megaport, and Zip Co. The Motley Fool Australia has recommended Betmakers Technology Group, Flight Centre Travel Group, and Megaport. 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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S&P/ASX 200 Index (ASX: XJO) healthcare shares saw a very mixed performance during the COVID-19 years of 2021 and 2022. But will 2023 be a stronger year?

For a few names, the pandemic saw elevated earnings. COVID testing produced a lot of extra profit and cash flow for names like Sonic Healthcare Ltd (ASX: SHL), as illustrated below, and Australian Clinical Labs Ltd (ASX: ACL).

But the COVID-testing businesses have seen their share prices plunge over the past year as COVID testing has reduced.

Many other ASX 200 healthcare shares actually suffered because surgeries and other forms of healthcare were delayed. Two examples of such delays impacting earnings during COVID include Ramsay Health Care Limited (ASX: RHC) and Cochlear Limited (ASX: COH).

CSL Limited (ASX: CSL) also suffered because the pandemic increased the cost of blood plasma and also reduced collections.

What’s the outlook for ASX 200 healthcare shares?

The companies that saw surgery delays now have waiting lists, so they can benefit from that strong demand in FY23.

While COVID testing is dropping, it’s still happening. For the month of October 2022, Sonic Healthcare reported that it generated $57.7 million of COVID-related revenue, which suggests that testing cash flow can still benefit those companies involved.

The investment giant Blackrock is one of the investors that likes the healthcare sector at the moment.

Blackrock said that healthcare is benefiting from a structural transition amid ageing populations. It said that healthcare has “appealing valuations and likely cash flow resilience during downturns”.

The fund manager suggested that it also likes healthcare because it’s “developing medicine and equipment to help meet ageing population needs”.

Valuations

While some ASX 200 healthcare shares have fallen, they still don’t have incredibly low price-to-earnings (P/E) ratios, reflecting investor confidence in their defensive nature.

Using the Commsec earnings projections for FY23, these are some of the valuations:

The CSL share price is valued at 35 times the estimated earnings.

The Ramsay Health Care share price is valued at 39 times the estimated earnings.

The Sonic Healthcare share price is valued at 19 times the estimated earnings.

The Cochlear share price is valued at 45 times the estimated earnings.

The ResMed CDI (ASX: RMD) share price is valued at 31 times the estimated earnings.

The post Are healthy returns on the horizon for ASX 200 healthcare shares in 2023? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Monday
• What’s the outlook for ASX 200 lithium shares in 2023?
• The 3 ASX 200 bank shares that outperformed all others in 2022
• I’d listen to Warren Buffett and invest in ASX shares with wide economic moats
• Guess how much a $20k investment in these ASX 200 shares in 2013 is worth now

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 CSL, Cochlear, and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Cochlear and Sonic Healthcare. 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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