The Santos Ltd (ASX: STO) share price is gaining on Thursday after the company revealed a record third quarter.

Shares in the S&P/ASX 200 Index (ASX: XJO) oil and gas giant are currently trading for $7.56, 2.44% higher than their previous close.

Santos share price rises on US$1b of free cash flow

Here are the key takeaways from the company’s September quarter:

• Production reached 26.1 million barrels of oil equivalent – up 2% quarter on quarter
• Sales revenue lifted 15% to US$2.15 billion
• Year to date sales revenue reached a record US$5.9 billion – up 86% year-on-year
• Free cash flow came in at a record US$1 billion for the quarter
• Year to date, free cash flow sits at US$2.7 billion – a 194% year-on-year improvement
• Sales volumes lifted 9% quarter-on-quarter to 29.9 million barrels of oil equivalent

Higher commodity prices and strong third quarter production saw Santos post record quarterly free cash flow and sales revenue. Higher LNG and domestic gas prices were partially offset by lower oil prices over the period.

Its average realised LNG price came in at US$16.76 per million barrels of oil equivalent and its realised price for domestic gas reached US$5.97 a gigajoule. Looking at crude oil, the company’s average realised price was US$108.21 a barrel last quarter.

The quarter’s record free cash flow saw the company’s gearing reduced to 20.8%.

Its Cooper Basin third-party oil volumes slipped last quarter after revised crude oil processing agreements were implemented. Though, that was offset by increasing east coast sales gas purchases.

Production was boosted due to an increase in Western Australia domestic sales gas customer nominations and higher PNG production, partially offset by wet weather impacts in the Cooper Basin and Queensland.

What else happened in the September quarter?

The quarter just been was a rough one for the Santos share price. It dumped 4.45% over the period.

The company also received an offer from a party looking to acquire a 5% stake in PNG LNG for an asset value of US$1.4 billion.

Meanwhile, its Barossa drilling operations were suspended following a Federal Court decision to set aside the regulator’s approval of the environmental plan. Santos is appealing the decision.

The company also revealed the final investment decision for the Pikka Phase 1 project in Alaska in August. Drilling at the project is expected to begin in the June quarter.

What did management say?

Santos managing director and CEO Kevin Gallagher commented on the update driving the company’s share price today, saying:

Energy security is a top priority for countries in our region. Given the ongoing strong customer demand for our product now and into the future, Australia’s role as a major energy-producing nation has never been more important.

As the world sees strong demand for our products, we continue to focus on the critical dual purposes of delivering the energy the world needs while investing to decarbonise the energy supply chain.

What’s next?

The company also updated its 2022 guidance today.

Its production guidance was dropped to between 103 million barrels of oil equivalent and 106 million barrels of oil equivalent.

The company’s sales volume guidance was also lowered to between 110 million barrels of oil equivalent and 114 million barrels of oil equivalent. That’s due to the implementation of revised Cooper Basin crude oil processing agreements. Santos assures the change won’t impact profits or cash flow.

Finally, the company’s major project’s capital expenditure guidance was lowered to between $1.15 billion and $1.25 billion.

Santos share price snapshot

The Santos share price has been outperforming so far this year.

It has gained 14% since the start of 2022. It’s also trading around 4% higher than it was this time last year.

Meanwhile, the ASX 200 has dumped 10% year to date and 8% over the last 12 months.

The post Santos share price lifts following US$1 billion quarter appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Why is the Santos share price getting left behind the ASX 200 today?
• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday
• Morgans names the best ASX resources shares to buy now

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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Lake Resources N.L. (ASX: LKE) shares have been up and down in the past year. But overall, they have soared ahead.

Lake shares have risen nearly 68% from 64 cents at market close on 19 October 2021 to $1.075 at market close yesterday.

So if I had invested $1,000 in this ASX lithium share 52 weeks ago, how much would I have now?

Is the Lake Resources share price a good investment?

Imagine if I had invested $1,000 in Lake Resources shares at 64 cents a year ago. I would have pocketed 1,562 shares with 32 cents left over.

Now, the Lake Resources share price is fetching $1.075. So my investment would be worth $1,679.15.

Taking a look at the year in more detail, the Lake Resources share price hit a high of $2.45 on 4 April this year.

At this time, my $1,000 investment would have been looking very good. I would have had $3,826.90.

However, on 14 July, Lake Resources shares were fetching just 60.5 cents a piece. At this point, I would have been behind, with $945.01 left from my $1,000 investment.

Overall, if I had bought $1,000 Lake Resources shares a year ago and held onto the shares through the highs and lows, I would be happy with my investment.

What else is happening?

Earlier this week, Lake advised it has created a new role on its executive team. Scott Munro will take on the position of senior vice president, technology, strategy and risk.

Commenting on this appointment, executive chairman Stuart Crow said:

This role will lead technology engagement for the company as it transitions towards development of resources and will support the continuing evolution of Strategy and Risk processes in support of long-term value creation for stakeholders.

This is part of Lake’s aspirational target to produce 100,000 tpa of high purity lithium; underpinning Lake’s aim to become a leading lithium producer globally.

Lake Resources has also recently signed an offtake agreement with SK On for supply of up to 25,000 tpa [tonnes per annum] of battery-grade lithium from the Kachi Project in Argentina.

Lake Resources share price snapshot

Lake Resources shares have climbed 6.44% in the year to date, while they have risen 2.87% in the past month.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has shed 8.66% in the year to date.

Lake has a market capitalisation of nearly $1.5 billion based on the current share price.

The post If I’d bought $1,000 of Lake Resources shares a year ago, I’d be one happy investor today appeared first on The Motley Fool Australia.

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• Here are the top 10 ASX 200 shares today
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• Is ASX 200 lithium player Lake Resources profitable?
• Here are the top 10 ASX 200 shares today
• Why are these ASX 200 lithium shares smashing it on Monday?

Motley Fool contributor Monica O’Shea 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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

What happened

Shares of Netflix (NASDAQ: NFLX) charged sharply higher on Wednesday, surging as much as 15.9%. As of the market’s close, the stock was still up 13.09%.

The catalyst that drove the streaming pioneer higher was the company’s financial results, which held good news on multiple fronts.

So what

Much to the delight of shareholders, Netflix reported that its subscriber growth turned positive in the third quarter, after two consecutive quarters of declines. Perhaps as importantly, it did so in grand fashion, with 2.4 million net additions, far exceeding its own guidance — and Wall Street’s expectations — of 1 million new subscribers. “Thank God, we’re done with shrinking quarters,” said co-founder and co-CEO Reed Hastings on the earnings webcast to discuss the results.

Netflix generated revenue of $7.9 billion, which rose 5.9% year over year. Excluding the impact of exchange rates, revenue grew 13%. The currency challenges continued to the bottom line, as its earnings per share (EPS) of $3.10 dipped slightly.

However, both numbers easily cleared expectations, with analysts’ consensus estimates calling for revenue of $7.8 billion and EPS of $2.14.

Now what

Netflix management discussed the company’s upcoming ad-supported service at great length. The “basic with ads” tier will launch in 12 countries and is set debut on Nov. 3 at $6.99 per month. The service will include four to five minutes of commercials per hour, with ads of 15 to 30 seconds in length. The price is also $1 less than competing ad-supported services by Disney+ and Hulu.

Co-CEO Ted Sarandos said, “Our basic with ads tier is going to help us open up Netflix to a whole new audience of folks who are attracted to all that great content at an even lower price point.” Chief Operating Officer Greg Peters chimed in, saying the tier will “bring in a lot more members, and we’re quite confident in the long term that this will lead to a significant incremental revenue and profit stream.”

Add in mega hits like Stranger Things 4, Monster: The Jeffrey Dahmer Story, and The Gray Man, and Netflix has once again proven its ability to bounce back in the face of adversity. That’s why the stock is a buy. 

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

The post Why Netflix stock rocketed higher Wednesday appeared first on The Motley Fool Australia.

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Danny Vena has positions in Netflix and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. 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.

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With the market starting to rebound, now could be an opportune time to look at buying some beaten down ASX shares.

Two that could be worth considering are listed below. Here’s what you need to know about them:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The first beaten down ASX share to look at is Domino’s.

It is of course one of the world’s largest pizza chain operators with restaurants across the ANZ, Asia, and European markets.

After losing half of its value in 2022, the team at Citi believe investors should be snapping up shares with a long term view. So much so, the broker has recently reaffirmed its buy rating with a $84.40 price target. This implies potential upside of 39% for investors over the next 12 months.

Citi commented:

We remain positive on the medium term outlook given same store sales appear on track to turn positive and some inflationary headwinds are moderating. The longer term store rollout opportunity has grown supported by the recent Asian acquisition. We also see further upside potential from additional acquisitions. Maintain Buy.

Life360 Inc (ASX: 360)

Another ASX share that has been smashed in 2022 is Life 360.

It is a location technology company that operates in the digital consumer subscription services market with its Life360 app. This hugely popular app has 40 million active users and offers families features such as communications, driver safety, and location sharing.

Goldman Sachs is very bullish on the company due to its massive market opportunity. The broker currently has a buy rating and $7.50 price target on the company’s shares, which implies potential upside of 17%.

It commented:

We estimate Life360 is exposed to a US$12bn global TAM with a large opportunity to expand its product suite, grow average revenue per paying circle (ARPPC), increase payer conversion, and lift penetration rates outside of the US.

The post 2 beaten down ASX shares with plenty of upside potential: analysts appeared first on The Motley Fool Australia.

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• 4 ASX tech shares with ‘long runways for growth at valuations rarely seen’: expert
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• Morgans names 2 ASX 200 shares to buy with 50%+ upside

Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360, Inc. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking for dividend shares to buy, then you may want to check out the two listed below.

These ASX dividend shares are ones that Morgans rates among the best on the market this month. Here’s what the broker is saying about them:

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

The first ASX dividend share to look at is this coal terminal operator.

Morgans is very positive on the company and is expecting big dividend yields in the coming years. It commented:

DBI holds the 99 year lease to the 85 Mtpa Dalrymple Bay Coal Terminal, of which c.80% of throughput is metallurgical coal (used in steelmaking). DBCT offers the cheapest export route-to-market for users within its Bowen Basin catchment region. DBCT is fully contracted from 2023 to 2028. In the current low interest rate environment, income-oriented investors will be attracted to DBI’s high cash yield and commitment to 1-2% [now 3% to 7%] pa DPS growth

As for dividends, Morgans is forecasting dividends per share of 21 cents in FY 2022 and 21.5 cents in FY 2023. Based on the latest Dalrymple Bay Infrastructure share price of $2.49, this will mean yields of 8.4% and 8.6%, respectively.

The broker currently has an add rating and $2.67 price target on the company’s shares.

Jumbo Interactive Ltd (ASX: JIN)

Another ASX dividend share that Morgans rates as a buy is Jumbo Interactive. It is the company behind the OzLotteries website/app and the Powered by Jumbo software-as-a-service (SaaS) platform.

Morgans is positive on the company’s outlook. In fact, it is forecasting an earnings per share compound annual growth rate of 20.8% over the next two years. It said:

We believe JIN offers excellent strategic growth opportunities, both in Australia and overseas, supported by a steadily expanding domestic market for digital lottery retailing. The business is cash generative and has a low requirement for ongoing capex. Lottery sales are resilient to economic cyclicality. They do not represent a large proportion of the personal budgets, hovering around 0.5% of household discretionary income in Australia.

In respect to dividends, the broker is forecasting fully franked dividends per share of 47 cents in FY 2023 and 57 cents in FY 2024. Based on the latest Jumbo share price of $12.75, this will mean yields of 3.7% and 4.5%, respectively.

Morgans has an add rating and $17.50 price target on the company’s shares

The post Morgans names 2 of the best ASX dividend shares to buy now 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 Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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For pretty much all of its listed life, the Telstra Corporation Ltd (ASX: TLS) share price has been known for its dividends. For its share price growth? Not so much.

After all, Telstra is a company that has seen its share price go backwards over the 21st century so far. And comprehensively so. Back in December 1999, this ASX telco was going for close to $9 a share. But as of yesterday’s close, Telstra was asking just $3.88 per share.

But on the upside, Telstra has always provided substantial dividend income to investors. As it stands today, the company offers a trailing and fully franked dividend yield of 4.25%.

But is this all Telstra shares are good for? As most investors know, past performance is not a guarantee of future success. And if this is true, then so is the inverse.

Well, the answer is a comprehensive yes, according to several ASX experts.

Experts name the Telstra share price as a buy

As my Fool colleague James covered earlier this month, ASX broker Morgans is currently optimistic over this ASX blue-chip share.

Morgans has given Telstra an add rating, together with a 12-month share price target of $4.60. The broker justified this by describing the company as in “good shape with strong earnings momentum and a strong balance sheet” after its turnaround. It also sees substantial value in some of the company’s underlying assets.

Here’s some more of what the broker said:

TLS currently trades on ~7x EV/EBITDA. However some of TLS’s high quality long life assets like InfraCo are worth substantially more, in our view. We don’t think this is in the price so see it as value generating for TLS shareholders.

This, free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means TLS looks well placed for the year ahead.

But it’s not just Morgans that is eyeing off Telstra shares. According to a recent article from Livewire, Paul Taylor, portfolio manager at Fidelity International, has named Telstra as one of his fund’s top holdings.

Taylor notes that as a dominant communications provider, Telstra is essentially a company that provides essential services. These companies, he argues, “perform well through inflationary periods and recessions“.

He goes on to say:

By their nature they are ‘essential’ and people continue to buy and consume these products and services regardless of market conditions.

In addition, these types of businesses are in a much better position to pass on higher input costs once again because they are essential. Inflation actually helps them grow.

So that’s a pretty glowing endorsement of Telstra shares as they currently stand from these two experts.

It will be interesting to see where the Telstra share price will go from here.

The post Is Telstra only worth considering for dividends, not share price growth? appeared first on The Motley Fool Australia.

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More reading

• The Telstra share price is still trading at less than half its record highs. Time to pounce?
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• If I’d invested $5,000 in Telstra shares 5 years ago, here’s how much dividend income I’d have pocketed
• 2 excellent ASX 200 shares to buy for a retirement portfolio: broker

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation Limited. 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 Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Due to the uncertain nature of the markets at the moment, it’s difficult to find high conviction even among professional investors.

With more interest rate hikes coming and no one knowing precisely when inflation might abate, many investors are holding their fire.

So in this environment, it’s refreshing to see an expert stick their neck out and actually provide an opinion.

There was one such instance this week when a particular S&P/ASX 200 Index (ASX: XJO) share was named as one that could rocket next year:

Is this the stock that everyone’s forgotten about?

Fairmont Equities founder Michael Gable reckons shares for biotechnology giant CSL Limited (ASX: CSL) are poised to head up.

“I think longer term, this is looking very good,” he told Switzer TV Investing.

“In some ways, CSL might have dropped off people’s radar because since the COVID lows [the share price] hasn’t really done anything. There’s been a lot of other stocks and opportunities out there.”

Indeed, CSL closed Wednesday at $276.96, which is still some way off its pre-pandemic high.

Even in recent times, the share price has dropped more than 7.5% since early September.

But the healthcare company reported decent results in August and last week outlined how its Vifor acquisition will boost its fortunes.

Gable has noticed that after two long years of volatility, the CSL share price has started to stabilise in recent weeks.

“It bottomed in February… and now it’s starting to outperform the broader index.”

Can history repeat?

If CSL can gain some momentum, according to Gable, 2023 could be very fruitful for shareholders.

“You could see CSL with a four in front of it potentially by the end of next year, if it breaks out.”

If the stock price can reach the $400s, that would mean a roughly 50% gain from current levels.

Gable pointed to a similar situation in the pre-COVID era that could be seen as a precedent for now.

“If we go back to 2018 when we had rate hikes, CSL, being a growth stock, was under pressure.”

But then the US Federal Reserve reversed its stance and declared it would be cutting, not raising, rates in 2019.

“[But] as soon as we got that Fed pivot… in 2019 CSL basically put on about 50%! So it could really get going.”

Gable is not the only one noticing CSL’s potential.

Both Citi and Wilsons have named it recently as one to watch for a post-pandemic rally.

According to CMC Markets, 14 out of 18 analysts currently rate the stock as a buy.

The post This ASX 200 share could be 50% higher next year: expert appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tony Yoo has positions in CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. 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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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Alphinity Investment Management portfolio manager Elfreda Jonker reveals how portfolios should be placed considering the uncertain times we live in.

Investment style

The Motley Fool: How would you describe your duties to a potential client?

Elfreda Jonker: I am the client portfolio manager at Alphinity Investment Management. I am responsible for creating Alphinity’s content and really looking after our clients from a client queries perspective, or really just sitting as the middle man between the portfolio managers and the client base, ensuring that our clients get the best service from Alphinity. 

But I do work very closely with both our Australia and global teams to ensure that I know what’s going on in the portfolios and I represent the fund to clients generally doing presentations and so forth.

Alphinity is an active equity fund manager based in Australia. We manage Australian and global equity funds across core and sustainable strategies. So for the purpose of the discussion today, I’ll focus on the Australian Share Fund. So that is a concentrated portfolio of about 35 to 55 high quality, large cap Australian listed companies, all of them being in an earnings upgrade cycle. 

What we’re looking for is we look for quality companies in an earnings upgrade cycle, trading at reasonable valuations. It’s a style-agnostic fund, so it’s designed to set as a core exposure in a portfolio and the key focus is to deliver consistent alpha through various market cycles — so either a growth or a value cycle. We’re style agnostic so we can hold any style company as long as it’s got those underlying characteristics I’ve explained.

MF: The world has changed dramatically since we last spoke about a year ago. How do you see the market at the moment and where do you see it going?

EJ: Clearly since we’ve last spoken, the market had a massive rally and then a big pullback again. If you look at the market versus a year ago, the market is certainly much cheaper than what it was, but I think the world is also a bit more of an uncertain space. 

Even post-COVID, we had a fantastic rally even through this period, but I think now we are at the point where it’s a little bit uncertain if the world’s actually going to go into a recession or not. I think if you look at it from an international perspective, it’s probably more uncertain than what we have here in Australia. 

The way we currently see it is that the overall market has derated quite a bit, but if you exclude the cheaper commodities and banking stocks, the rest of the market is actually not as cheap.

So with that, the combination of a lot of uncertainty around the earnings and where earnings growth is going to come from, we think we definitely [are] still in an earnings downgrade cycle. At this point in time for us, we have been transitioning our portfolio to be a bit more defensive over the last number of months. We’re definitely more exposed to the value defensive side of the market currently rather than in very highly valued, high growth companies, which we think is a bit of a difficult environment to be in. 

We have overweight positions in some of the more defensive parts of the market like insurance, for example. But for us it’s very much about bottom-up stock selection and looking for each of those companies in the various sectors that’s high quality, that’s got strong balance sheets and that can still grow earnings in an environment where the overall market might not be able to.

The post The ASX shares we’re targeting in an uncertain world: expert appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Think it’s boring? The IAG share price has totally smashed the ASX 200 so far in 2022
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• Rio Tinto share price has 20% upside and 7% dividend yield: Goldman Sachs
• Why did the Magellan share price get bashed around today?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Wednesday, the S&P/ASX 200 Index (ASX: XJO) was on form again and pushed higher. The benchmark index rose 0.3% to 6,800.1 points.

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

ASX 200 expected to fall

The Australian share market looks set to fall on Thursday after a poor night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 60 points or 0.9% lower this morning. In late trade in the United States, the Dow Jones is down 0.4%, the S&P 500 has fallen 0.7% and the NASDAQ has dropped 1%.

Oil prices rebound

Energy shares including Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) could have a decent day after oil prices rebounded on Wednesday night. According to Bloomberg, the WTI crude oil price is up 2.8% to US$85.10 a barrel and the Brent crude oil price is up 2% to US$91.88 a barrel. Traders appear to believe that oil prices have been oversold.

Annual general meetings

A number of ASX 200 companies are holding their annual general meetings today and could provide trading updates. This includes health supplements company Blackmores Ltd (ASX: BKL), healthcare company Healius Ltd (ASX: HLS), struggling fund manager Magellan Financial Group Ltd (ASX: MFG), fellow fund manager Perpetual Limited (ASX: PPT), and toll road operator Transurban Group (ASX: TCL)

Woodside quarterly update

The Woodside Energy Group Ltd (ASX: WDS) share price will be on watch when it releases its quarterly update this morning. Investors will be keen to see if the energy giant is still on track to achieve its full year production guidance of 145 – 153 Mmboe. Woodside’s costs may also be in focus. During the first half, it reported a 47% increase in unit production costs to US$7.2 per boe due to the impact of maintenance and the Wheatstone shutdown.

Gold price tumbles

Gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a difficult day after the gold price dropped overnight. According to CNBC, the spot gold price is down 1.3% to US$1,633.8 an ounce. The precious metal hit a three-week low after US treasury yield strengthened.

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

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More reading

• Why did the Magellan share price get bashed around today?
• Why is the Woodside share price having such a stinker this week?
• Beach Energy share price sinks 6% as production tumbles
• 5 things to watch on the ASX 200 on Wednesday
• It’s a good day on the ASX 200. So why is the Woodside share price getting beaten up?

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

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It can be a challenge to outperform the S&P/ASX 200 Index (ASX: XJO) at the best of times. Yet, the Insurance Australia Group Ltd (ASX: IAG) share price has been one of the top 20 index constituents to outperform the benchmark the most this year.

Over the last 10 months, shares in the general insurance company have surged 14.8% to the upside. Meanwhile, the broad market index has fallen more than 10% to the wayside.

So, how has a seemingly ‘boring’ business like IAG made such a solid return for investors of late?

Boring can be beautiful

At its core, investing is about owning portions of great companies with the ability to accrue profits over time. Ideally, you want to invest in a company at the right price. Though, what the ‘right price’ is a question only answered in retrospect.

One way a company can be temporarily undervalued — or cheap — is for the broader market to underestimate its earning potential. This opportunity can manifest when most underestimate the duration for which the company can generate profits or the size of those annual earnings.

This situation might be playing out for the IAG share price in 2022, as we look at the company’s earnings and share price fluctuations over the last couple of years.

Between the start of 2020 and 2022, shares in the insurance provider fell 44%. The combination of an increase in natural disaster occurrences and COVID-19 weighed on the company.

Namely, IAG created a $950 million provision in the event it would need to cover claims pertaining to business interruption insurance due to the pandemic. Due to the provision, IAG’s statutory earnings have been reduced.

Meanwhile, the company’s cash from operations between the start of 2020 and now have increased. Specifically, IAG generated $899 million in operational cash flow for the 12 months ending 30 June 2022. This compares with $407 million as at December 2020.

As we recently reported, $350 million of those provisions are now being returned to shareholders in the form of a share buyback. This follows the High Court denying appeals against COVID-19-related claims.

Is the IAG share price a buy still?

At present, IAG shares are trading on a rather rich price-to-earnings (P/E) ratio of 36 times. For reference, the global insurance industry average is 11.4 times earnings.

Despite this, deputy head of equities at Perpetual Limited (ASX: PPT) Vince Pezzullo shared his liking for IAG in a post on Livewire last month. According to the portfolio manager, IAG could be trading at a discount.

In addition to the solid IAG share price growth, the company offers a reasonable dividend yield of 2.3%.

The post Think it’s boring? The IAG share price has totally smashed the ASX 200 so far in 2022 appeared first on The Motley Fool Australia.

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More reading

• Could investors in this ASX 200 share be in for more payment windfalls?
• Here are the top 10 ASX 200 shares today
• IAG share price takes centre stage on $350 million buyback news
• IAG share price halted amid High Court ruling
• Could this be a looming risk for IAG shares?

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

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