South32 shares have almost doubled in a year. At current valuation levels, more and more brokers are starting to turn against the stock.

Those brokers, including Morgans, MPC Markets and others, have also issued fresh ratings on two other ASX stocks this week.

Between the three, one has run too hard, one is caught in a housing downturn, and one is rebuilding itself.

Here’s what the brokers had to say

Hold: South32 shares

South32 Ltd (ASX: S32) shares have gained 96% over twelve months, which values the miner at roughly $23 billion.

Morgans has downgraded to a hold, arguing the earnings upcycle is now reflected in the price.

The broker noted the stock has outperformed even the pure copper producers.

To explain the rally, investors need look no further than the FY26 numbers.

Underlying revenue rose 7% to US$8,108 million and underlying EBITDA jumped 28% to US$2,462 million.

Underlying earnings after tax climbed 55% to US$1,032 million, with the operating margin widening 4.7 percentage points to 31.0%.

The final dividend more than doubled to US5.4 cents, taking the full-year payout to US9.3 cents fully franked.

Net cash reached US$283 million and free cash flow grew 136% to US$610 million.

Chief executive Matt Daley said of the year:

We’re repositioning South32 as an upstream, base metals-focused company, primed for growth, and transforming into a simpler, stronger business.

Sell: Australian Finance Group

Australian Finance Group Ltd (ASX: AFG) finds itself in the opposite situation.

The mortgage aggregator closed near $1.435 at the start of the week, down almost 49% over twelve months and near a 52-week low.

MPC Markets sees more downside than upside from here, pointing to the slowing property market.

Home loan applications have fallen sharply since the May federal budget, and AFG’s earnings follow that volume directly.

The frustrating part is that the business itself performed.

FY26 net profit after tax rose 39% to $49 million, with underlying profit up 33% to $54 million. Residential settlements grew 18% to $75 billion and the loan book expanded 30% to $7.1 billion.

More than 4,300 brokers now write roughly one in nine Australian mortgages through the group.

At 8.55 times earnings and a 5.94% yield, a housing downturn is already reflected in the price, potentially presenting an opportunity for investors who take a contrary view on the housing market.

Buy: Magellan Financial Group

Magellan Financial Group Ltd (ASX: MFG) is the contrarian call of the three.

Morgans remains constructive despite trimming its price target, and the reason is the Barrenjoey merger.

The merger was completed on 1 July. In this transaction, the investment bank contributed $112 million of operating profit after tax in FY26 at a 32.9% return on equity.

However, the headline numbers still look ugly.

Statutory net profit after tax of $146 million was roughly half the prior year.

Standalone Magellan revenue fell 12% to $291 million, and combined funds under management were $41 billion at 30 June.

Shareholders received a fully franked second-half dividend of 25.5 cents, an 80% payout, with a 60% to 90% range targeted from here.

The group intends to rebrand as Barrenjoey, subject to a shareholder vote at the annual general meeting in October.

Foolish takeaway

I think the Morgans’ view on South32 shares is fair.

A 96% gain and a doubled dividend is what a commodity peak often looks like. The balance sheet is in excellent condition either way.

Australian Finance Group looks cheap yet very risky, since nothing improves for a mortgage aggregator until applications recover.

Magellan is the most interesting of the three, because the market is still valuing the company as a fund manager, instead of an investment bank. This could provide an opportunity for investors looking for bargain deals on the market.

The post Buy, hold, sell: South32, Australian Finance Group and Magellan shares appeared first on The Motley Fool Australia.

More reading

• 9 ASX shares downgraded by experts post-results this week
• 8 ASX shares upgraded by the professionals post-results this week
• Buy, hold, sell: South32, Australian Finance Group, Magellan shares
• 5 ASX shares downgraded by Morgans post-results
• Buy, hold, sell: South32, Mineral Resources, BHP shares

Motley Fool contributor Mark Verhoeven 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.

Temple & Webster Group Ltd (ASX: TPW) shares have been smashed over the past year, falling around 79%.

At approximately $4.70 today, investors are being offered a very different entry point to 12 months ago.

I think the sell-off has gone far enough to create an opportunity for long-term investors.

The market is much bigger than Temple & Webster

Temple & Webster is Australia’s largest pure-play online furniture and homewares retailer, but I think its current scale can disguise how much of the market remains available.

The company puts its addressable Australian furniture, homewares, and home improvement markets at around $40 billion. Earlier this year, management was still targeting $1 billion of annual revenue by FY28.

That gives some perspective on the runway ahead.

There is also a structural shift that could help Temple & Webster take more of that spending.

Only around 20% of Australian furniture and homewares sales were online based on the company’s market analysis, compared with 35% in the US and 29% in the UK. Online penetration in home improvement was even lower at around 5% to 10%.

I do not think Australia needs to completely match either overseas market for Temple & Webster to benefit. Even a gradual shift online could move billions of dollars of spending towards the channel where it is already a leader.

There is more than furniture to pursue

I also like that the opportunity is no longer confined to sofas, dining tables, and homewares.

Home improvement has significantly expanded the market Temple & Webster can target, while the company has started testing its model in New Zealand. Its Australian business also benefits from an asset-light model where much of its range is shipped directly from suppliers.

That gives the ASX share several ways to become larger without needing the overall furniture market itself to suddenly boom.

For me, the long-term question is whether Temple & Webster can keep taking spending away from traditional stores as more people become comfortable furnishing their homes online.

I think it can.

Still not a cheap share

The 79% fall has not turned Temple & Webster into a conventional value stock.

At $4.70, consensus earnings per share forecasts of 13.6 cents in FY27 put it on a PE ratio of roughly 35 times forward earnings.

But analysts expect earnings to rise to 15.3 cents in FY28 and 20.6 cents in FY29. If that final forecast is achieved, today’s price represents less than 23 times FY29 earnings.

That is much easier for me to accept when the business is still pursuing such a large market.

There are risks. Consumer spending can weaken, competition could increase, and the shift towards online furniture shopping may take longer than expected. But I believe this is priced into its shares following their sharp decline.

Foolish takeaway

A 79% decline gets my attention when the growth opportunity remains this substantial.

Temple & Webster still needs to deliver, and I would not call the shares cheap at around $4.70.

But with online penetration still relatively low and a huge market left to capture, I think the current price gives patient investors an attractive chance to back the business for the next several years.

The post This ASX share is down 79%. Is it a buy? appeared first on The Motley Fool Australia.

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• Buy, hold, sell: Breville, Car Group, Temple & Webster shares
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Motley Fool contributor Grace Alvino 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 Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

All Ordinaries Index (ASX: XAO) construction services specialist Shape Australia Corporation Ltd (ASX: SHA) counts among my top passive income picks today.

There’s a lot to like about this stock.

First, the share price has been in a strong upward trend for more than three years now.

Second, it pays fully franked dividends. This give you credit for the 30% in corporate taxes the company has already forked out to the ATO on the profits it earns. Meaning you should be able to hold onto more of that passive income when it’s time to pay your own tax bill.

And, importantly, Shape has been steadily increasing its dividend payouts for four years running now. That’s a trend I like to see.

Over the past 12 months (as at Thursday afternoon) the Shape share price has rocketed 74.5%, recently trading for $7.40 a share.

Over this time, the ASX All Ords stock has paid – or shortly will pay – two fully franked dividends totalling 32 cents per share.

Shape shares traded ex-dividend on 28 August. Shareholders who held the stock on 27 August can expect to see the final 18 cents per share hit their bank accounts on 14 September.

At the recent share price, then, Shape trades on a 4.3% fully franked trailing dividend yield.

But some investors are earning a lot more from their Shape shares.

Getting in early for that passive income boost

While trying to time the market is incredibly difficult – and nearly impossible to do consistently – buying the right ASX dividend stocks in their earlier growth days can pay off handsomely over time.

Which relates more to “time in the markets” than timing them.

In Shape’s case, savvy passive income investors could have bought into the company for $1.80 a share in early January 2024. Now, I’m not cherry-picking a particularly low entry point here. Indeed, in January 2024, the Shape share price had gained 19% over the prior 12 months.

Now, if you’d bought Shape shares in January 2024, and held tight, you’d have been eligible to receive the past six fully franked dividends, totalling 71.5 cents a share. This would have already returned 40% of your initial investment to you as passive income alone, not to mention the 311% increase in the Shape share price over this time.

And at your buy-in price of $1.80, the past year’s dividend payout of 32 cents per share equates to a fully franked dividend yield of 17.8%. Or 25.4% grossed-up, if we factor in those franking credits.

The post How these savvy passive income investors are earning a stellar 18% dividend yield from this ASX All Ords stock appeared first on The Motley Fool Australia.

More reading

• Up 75%! Why this rocketing ASX All Ords stock is forecast to deliver more outsized gains
• SHAPE Australia: Record profit, revenue, and dividends in FY26

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