Tag: Fool

Today, I will be looking at two ASX large-cap stocks that are catching investors’ eye with their recent performance.

ANZ Group Holdings Ltd (ASX: ANZ) and Qantas Airways Ltd (ASX: QAN) have both seen significant gains this year and are on expert’s radars.

And with the S&P/ASX 200 Index (ASX: XJO) advancing just a little more than 2% this year to date, these could be attractive options for anyone looking to add solid performers to their portfolio.

Here’s why these two ASX large caps could be cheap right now.

Is ANZ a cheap ASX large-cap stock?

ANZ shares are currently trading at $29.18 just after the open on Tuesday. This marks a nearly 13% increase this year year-to-date. According to Goldman Sachs and UBS, ANZ shares could continue to deliver impressive returns.

UBS has set a price target of $30 for ANZ shares, implying an around 3% upside from the current level. According to my colleague Tristan, the broker reckons ANZ will generate earnings per share (EPS) of $2.29 in FY24, with a growth of 5.7% to $2.42 in FY25.

This growth could stem from ANZ’s recently announced $2 billion share buyback, which reduces the number of shares on issue and enhances EPS.

Meanwhile, Goldman Sachs analysts rate ANZ a buy thanks to its “large pipeline available which can be used to offset cost inflation”.

“We continue to see upside for [ANZ] Group returns due to accretive mix shifts in the Institutional business towards higher ROE Payments and Cash Management business”, the broker said, adding ANZ trades at a discount to the sector, excluding dividends.

ANZ has outperformed the ASX 200 Index by over 18% in the last 12 months, with a 26% rise compared to the index’s 9% gain. It currently trades at a price-to-earnings ratio (P/E) of 12.8.

This tells me investors are paying less for $1 of the banks’s earnings than they are for the iShares Core S&P/ASX 200 ETF (ASX: IOZ), the index fund tracking the benchmark, with a P/E of 18 times.

The earnings yield is 7.7% at this P/E. When combined with the ASX large-cap stock’s trailing dividend yield of 6.1%, this represents potential value in my opinion.

Are Qantas shares undervalued?

The Qantas share price is up 15% this year and currently trades at $6.20 apiece. Despite this rise, many analysts believe Qantas shares are still undervalued compared to its peers.

Goldman Sachs recently added Qantas to its June Asia-Pacific conviction list. The broker says the airline is primed to grow beyond its pre-pandemic ranges. It expects Qantas to produce EPS of 85 cents in FY24 and 96 cents in FY25, which is significantly higher than the 57 cents per share reported in 2019.

Qantas currently trades at a P/E ratio of 6.7, which is well below the average P/E of 9.1 for its regional and US competitors, according to Goldman.

If Qantas hits its projected EPS of 96 cents in FY25 and its P/E converges to the peer average, this implies a potential share price of $8.64, as I’ve discussed previously.

Goldman Sachs has set a price target of $8.05 for Qantas shares, implying a potential upside of 29% from the current price.

This valuation makes Qantas shares look cheap in my view. It offers potential upside for investors with a substantial margin of safety.

But it’s not just the potential disconnect in valuation. Several factors could drive Qantas shares higher. Goldman Sachs highlights that the airline’s cost-out program, operational performance improvements and potential positive trading updates could also boost investor confidence.

It also expects Qantas to potentially return $1.2 billion to shareholders as dividends over FY 2025-2027.

Conclusion

ANZ and Qantas might present compelling opportunities for investors seeking ASX large-cap stocks with strong growth potential.

With their solid performance and attractive valuations, experts say these stocks could be worth considering for your portfolio.

As always, conduct your own due diligence and remember to consider your personal financial circumstances.

The post 2 ASX large-cap stocks that look cheap right now appeared first on The Motley Fool Australia.

More reading

• How to earn $1,900 in passive income with just $10,000 in savings
• 3 of the best ASX blue chip shares to buy in June
• Here’s where I see the Qantas share price ending in FY 2025
• Why this top broker says ANZ shares can deliver 10%+ returns in FY25
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Zach Bristow 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.

The S&P/ASX 200 Index (ASX: XJO) is down 1.1% today, but you can’t blame this rocketing ASX 200 share.

Shares in the auto parts company closed on Friday trading for $4.36. In earlier trade on Tuesday, shares were swapping hands for $4.99 apiece, up 14.5%. After some likely profit-taking, shares are currently trading for $4.88, up 11.9%.

This comes after management confirmed media speculations of a potential takeover offer at a significant premium to Friday’s closing price.

Any guesses?

If you said Bapcor Ltd (ASX: BAP), give yourself a virtual gold star.

Here’s what’s happening.

ASX 200 share in takeover crosshairs

The ASX 200 share is rocketing today after reporting it had received a non-binding, indicative proposal from Bain Capital after market close on Friday.

The United States-based private investment firm is seeking to acquire all of Bapcor’s shares by way of a scheme of arrangement. This would see Bapcor shareholders receive $5.40 cash per share, adjusted for any dividends paid or declared after this proposal.

That’s almost 24% higher than Friday’s closing price, explaining why the Bapcor share price is having such a stellar run today.

Bain’s offer values the ASX 200 share, which has some 1,100 Autobarn, Autopro and Burson stores, at more than $1.8 billion.

Amid the media speculations of a takeover offer, the board said it was disclosing its receipt of the indicative proposal before concluding its assessment. The board stressed that the proposal remains subject to a number of conditions being met.

“The board cautions that at this time there is no guarantee that the indicative proposal put forward by Bain Capital will result in a binding offer or that any transaction will eventuate,” they stated.

Macquarie Capital has been appointed as Bapcor’s financial adviser and Allens as its legal adviser.

Investors in the ASX 200 share were advised they do not need to take any action at this time.

How have Bapcor shares been tracking?

Bain Capital is lobbing its bid for Bapcor after a sizeable share price retrace for the auto parts retailer.

Before market open today, the ASX 200 share was down almost 27% over the past 12 months. Though that doesn’t include the 21 cents a share in fully franked dividends Bapcor paid out over this period.

The stock has been under pressure following profit downgrades amid rising costs. The company has also struggled with its top management, with Paul Dumbrell backing out of his appointment as CEO in April, just days before he was meant to take up the helm.

The post Guess which ASX 200 share just rocketed 15% on a $1.8 billion takeover offer appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

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

The GQG Partners Inc (ASX: GQG) share price has delivered excellent performance over the last six months, surging more than 70%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has gained around 9% over the same time period.

Despite the huge rise in the GQG share price, I still think it’s a long-term opportunity due to the progress the business is making and what I believe is still a good valuation.

The fund manager, based in the US, offers clients a variety of different investment strategies including US shares, emerging market shares, and global shares. It also offers investment options like dividend shares.

There are a few reasons I’m still excited about this company.

Solid growth rate

GQG’s growth is reliant on an increase in its funds under management (FUM).

The company’s main investment strategies have outperformed their respective benchmarks, which helps organically grow the FUM and also helps attract more FUM from clients.

As of 31 May 2024, GQG’s FUM had reached US$150.1 billion, up from US$120.6 billion at 31 December 2023. That’s an increase of 24% in just five months.

In the five months to May 2024, the ASX All Ords company experienced net inflows of US$9.1 billion – it’s seeing a lot of extra client money flowing in, which is compelling and suggests inflows could continue at a decent rate in the coming months.

The business charges minimal (or no) performance fees via its funds, so nearly all of its revenue comes from management fees. FUM growth is key to delivering revenue growth.

Operating leverage

Fund managers can deliver rising profit margins as they grow because their costs may not rise as much as revenue.

For example, a funds management business doesn’t need an additional 10% more people or a 10% bigger office if its FUM grows by 10%.

The business has rapidly grown in the last two years, so it has increased its expenditure to reflect the global fund manager it has become, including geographic expansion (such as Australia). But, I believe operating leverage will be displayed in the next few years and the company’s profit margins can increase.

In GQG’s 2023 result, net revenue rose 18.5% and net profit after tax rose 18.7%.

Low earnings multiple

Fund managers don’t usually trade on a high price-to-earnings (P/E) ratio, so we’re able to buy the earnings at a reasonable multiple compared to some other sectors.

GQG is valued at 16x FY23’s distributable earnings and the fund manager has grown significantly since FY23. Its average FUM for FY23 was US$101.9 billion – the ASX share’s FUM (as at May) is currently 47% higher than this, suggesting pleasing earnings growth over the next 12 months.

The company is committed to a dividend payout ratio of 90% of its distributable earnings. Based on Commsec’s dividend estimate for FY24 and FY25, GQG is valued at 13x FY24’s estimated distributable earnings and 12x FY25’s estimated earnings.

Good dividend

GQG is predicted to pay an annual dividend per share of 18.2 cents in FY24 and 19.9 cents per share in FY25, translating into forward dividend yields of 6.9% and 7.5%, respectively (GQG’s financial year runs on the calendar year, so the FY24 annual dividend is still a prediction).

While these are not the biggest dividend yields on the ASX, I think they could be among the better yields from a company that’s still growing at a decent pace.

The post This low-profile $7.8 billion ASX share has risen 70% in 6 months. I’d still buy it! appeared first on The Motley Fool Australia.

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• Here’s how I’d target a $2,000 second income by investing $35 a week
• 2 great value ASX shares I want to buy
• How to choose ASX shares for passive income

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

There are a good number of options on the Australian share market for investors looking for exposure to the retail sector.

But which ASX retail shares are in the buy zone right now? Well, six that analysts at Bell Potter are bullish on are listed below.

But first, let’s take a look at what the broker is saying about the sector. Commenting on the retail sector, Bell Potter said:

We make earnings changes to LOV & TPW driven by medium to long term revisions and PFP as we factor in the acquisitions announced yesterday. We also increase our target earnings multiples for LOV & UNI which see our LOV, UNI, TPW & PFP price targets increasing 17%, 9%, 6% and 2% respectively. We’ve seen the Consumer Disc. sector (ASX200) testing its 10-year median P/E multiple (20.5x) back in Jul-23, however materially re-rating since then towards a high point in late Mar-24 (25.8x), and thereafter a correction back to 22.5x.

In this backdrop, we identify key opportunities where the valuations are well supported by distinctive growth traits and also clearly identifiable large TAM opportunities. Our key picks are the two global rollout names, LOV & PMV and also AX1 & UNI given the potential income tax cut benefit from 1Q25 to the younger consumer demographic and short-term catalysts for UNI associated with fast-approaching supportive comps.

Let’s now take a look at six ASX retail shares that the broker is recommending as buys. They are as follows:

Accent Group Ltd (ASX: AX1)

Bell Potter has a buy rating and $2.50 price target on this footwear retailer’s shares. This implies potential upside 25% for investors from current levels.

Cettire Ltd (ASX: CTT)

This online luxury products retailer’s shares could be great value following recent weakness. The broker has a buy rating and $3.01 price target on its shares, which suggests potential upside of 28% for investors.

City Chic Collective Ltd (ASX: CCX)

Bell Potter has a buy rating and 62 cents price target on this plus sized women’s fashion retailer’s shares. Based on its current share price of 28 cents, this implies that its shares could more than double in value from current levels.

Lovisa Holdings Ltd (ASX: LOV)

Another ASX retail share that the broker is bullish on is fashion jewellery retailer Lovisa. It has a buy rating and $36.00 price target, which suggests that they could rise of 15% for investors.

Premier Investments Limited (ASX: PMV)

Bell Potter thinks that Smiggle and Peter Alexander owner Premier Investments could be in the buy zone. The broker has a buy rating and $35.00 price target on its shares. This implies potential upside of 21% for investors.

Universal Store Holdings Ltd (ASX: UNI)

A final ASX retail share that could be a buy is Universal Store. Bell Potter has a buy rating and $6.15 price target on the youth fashion retailer’s shares. Based on its current share price of $5.12, this would mean potential upside of 20%.

The post 6 ASX retail shares to buy this month appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Lovisa and Universal Store. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Accent Group, Cettire, Lovisa, and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A2 Milk Company Ltd (ASX: A2M) shares have risen around 70% in 2024 to date, as shown on the chart below. Despite recent Chinese headwinds, the company is expected to see growing profit in the coming years.

This leading New Zealand infant formula business has managed to navigate the difficulties and uncertainties caused by the COVID-19 pandemic, and investors now seem to be looking forward to a positive outlook.

With the FY24 half-year result, the company noted it had gained a “significant” market share in the Chinese label infant formula over the prior few years, leading to revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) growth.

The A2 Milk Chinese infant formula market share has reached 6.4%, “becoming one of the most successful brands in China and in the top-5 overall.” The business has focused on more ‘controlled’ channels, away from the daigou channel.

A2 Milk warned that due to China’s annual birth rate declining, it may take until FY27 (or later) to reach its $2 billion target of annual revenue rather than FY26. It’s still targeting an EBITDA margin “in the teens”.

Having said all of that, the business is still expected to deliver growth in the next few years, according to the broker Goldman Sachs’ estimates on Commsec.

FY24

In FY23, the business generated NZ$1.59 billion of revenue, NZ$219.3 million of EBITDA and NZ$155.6 million of net profit after tax (NPAT).

Goldman Sachs expects growth across all those financial metrics in the 2024 financial year, which ends this month.

The broker thinks A2 Milk’s annual revenue can increase to NZ$1.69 billion (up 6%), which could support EBITDA rising by 8% to NZ$237.4 million. The NPAT could increase 9% to NZ$169.8 million based on the projections.

If those predictions come true, it shows the company’s profit margins could grow, which would be a positive for A2 Milk shares.

FY25

Goldman Sachs suggests the business could continue growing in FY25.

Annual revenue is projected to rise another 6.25% to NZ$1.79 billion in FY25, with EBITDA increasing by 15.5% to NZ$274.2 million. NPAT could then grow another 13.3% to NZ$192.4 million. So, the predictions suggest another year where profit could rise faster than revenue, implying improving margins.

FY26

The broker thinks there could be yet another year of earnings growth for owners of A2 Milk shares in the 2026 financial year.

A2 Milk’s annual revenue is predicted to rise another 5% to NZ$1.89 billion, with EBITDA projected to increase 10.7% to NZ$303.6 million and NPAT predicted to rise around 12% to NZ$215.2 million.

The infant formula market has been difficult to forecast over the last five years with a lot of unpredictability. Still, if the company can keep growing earnings, it could be a helpful tailwind for A2 Milk shares.

The post Here is the earnings forecast out to 2026 for A2 Milk shares appeared first on The Motley Fool Australia.

More reading

• My ASX share portfolio has two giant weeds in it. Should I pull them out?
• How ASX shares vs. property performed in May
• Here are the top 10 ASX 200 shares today
• Up 63%: The A2 Milk share price just hit a new 52-week high
• Guess which 7 ASX 200 shares are smashing new 52-week highs today

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 Goldman Sachs Group. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Global X Fang+ ETF (ASX: FANG) is an exciting exchange-traded fund (ETF) that has delivered excellent returns. There are plenty of compelling elements to know about this investment.

It may not be as well-known as some of the other ASX-listed, US-focused ETFs, such as Betashares Nasdaq 100 ETF (ASX: NDQ) and iShares S&P 500 ETF (ASX: IVV), but I think it could be an ETF worth owning.

The FANG ETF tracks an index of some of the largest US tech companies. The ETF was started in February 2020, so it’s relatively young compared to some ASX ETFs.

If I were considering the FANG ETF, I’d want to know about the below factors.

Concentrated exposure

Investors who want exposure to the US technology giants can get it in abundance with this ASX ETF.

There are only ten holdings in the portfolio, meaning there isn’t much diversification on the surface. As of 7 June 2024, these are the holdings and the weightings:

• Nvidia (12.28%)
• Alphabet (11.66%)
• Apple (10.48%)
• Broadcom (10.27%)
• Netflix (9.81%)
• Tesla (9.68%)
• Amazon.com (9.66%)
• Microsoft (9.43%)
• Meta Platforms (9.19%)
• Snowflake (7.5%)

The holdings are meant to be equally weighted, and the current allocations are just a measure of the share price performance in recent times.

While it may offer little diversification, the strength of this collective group of businesses has been exceptional in the last few years, so it has been beneficial to own them. In the three years to June 2024, the FANG ETF has returned an average of 22% per year. But I wouldn’t expect the next three years to be anywhere near as strong.

Great tailwinds

Many of these stocks give exposure to some of the strongest growth themes.

Nvidia, Microsoft and Alphabet offer AI exposure. Alphabet, Apple and Meta Platforms are benefiting from the global growth of smartphone usage. Amazon, Microsoft, and Alphabet are generating good earnings growth in cloud computing. The long-term global shift towards online video is another benefit, which helps Netflix, Alphabet (YouTube) and Apple. And so on.

Several global technological shifts are taking place, and these companies seem to be at the heart of those changes.

Cheaper than the NDQ ETF

One of the most popular ways to gain elevated exposure to US tech giants is the NDQ ETF, which has $4.7 billion of net assets. Betashares Nasdaq 100 ETF has an annual management fee of 0.48%, which is cheaper than what many global active fund managers might charge.

If investors are buying the NDQ ETF for US tech exposure, then the FANG ETF’s annual management fee of 0.35% could be more appealing because it is 13 basis points (0.13%) cheaper per year.

Over the three years to 31 May 2024, the NDQ ETF has delivered an average return per annum of 16.6%, which is weaker than the FANG ETF’s return of 22% per annum. Of course, past performance (and prior outperformance) can’t be relied on for future performance.

The post 3 things about the Global X FANG+ ETF (FANG) every smart investor knows appeared first on The Motley Fool Australia.

More reading

• 3 excellent ASX ETFs I think are a buy right now

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. 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. 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 Nasdaq 100 ETF, Meta Platforms, Microsoft, Netflix, Nvidia, Snowflake, Tesla, and iShares S&P 500 ETF. 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 positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Charter Hall Long WALE REIT (ASX: CLW) share price is down 34% from April 2022, as shown on the chart below. The ASX dividend stock may be able to provide a high level of passive income.

This real estate investment trust (REIT) is one of the larger businesses in the property sector.

It has a portfolio across a range of different property sectors, including office leases with the government, pubs and bottle shops, telecommunication exchanges, service stations, quality retail, grocery and distribution, food manufacturing, waste and recycling management, Bunnings warehouse properties and other sectors.

I’m not suggesting the ASX dividend stock just because it’s fallen. It also has a number of appealing factors that make it a compelling long-term buy.

Appealing rental factors

As the name of the REIT suggests, it has a long weighted average lease expiry (WALE) of 10.8 years. In other words, the business has signed its tenants on long-term rental contracts, which provides a lot of rental visibility for investors and locks in a lot of future income for the business.

At 31 December 2023, Charter Hall Long WALE REIT had an occupancy rate of 99.9%, so its portfolio is generating almost as much rental income as it can. Nearly all of its tenants are government, ASX-listed, multinational or national tenants.

The business is benefiting from a pleasing level of rental income growth, with around half of the portfolio exposed to CPI-linked reviews. The ASX dividend stock reported a weighted average rental review (WARR) of 4.3% in the FY24 first half, which I think is a solid level of rental growth for a diversified REIT.

Large valuation discount?

Every reporting period, the business tells the market what its net tangible assets (NTA) are. This is the business’ best estimate of the underlying value of its assets and liabilities.

At 31 December 2023, the ASX dividend stock had NTA of $5.14 per security, so the Charter Hall Long WALE REIT share price is at a 31% discount to this.

It’s hard to say precisely what the property portfolio is worth without going through a sales process, but another way to look at the business is based on how much passive income it’s producing.

ASX dividend stock’s passive income yield

The business pays out 100% of its operating (rental) profit each year, which is a generous distribution payout ratio.

However, that choice can still lead to success for shareholders because the rental income is steadily growing, and over time, the properties will hopefully increase in value (thanks to the growing rental potential).

The estimate on Commsec suggests the business could pay a distribution per unit of 27 cents, which is a distribution yield of 7.6%. I think that’s a solid yield and could grow in future years with rental growth, though what happens with interest rates could have a sizeable impact on its net rental profits in the coming years.

The post 1 ASX dividend stock down 34% to buy right now appeared first on The Motley Fool Australia.

More reading

• Overinvested in CBA shares? Here are two alternative ASX dividend stocks
• Here’s how I’d target a $2,000 second income by investing $35 a week
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Commonwealth Bank of Australia (ASX: CBA) is one of the most popular, large-cap shares on the ASX. However, bigger doesn’t automatically mean a better investment. Personally, I’m not attracted to the ASX bank stock for a few different reasons.

Yes, the business has performed very well for investors over the past three decades and is still paying a solid dividend yield.

But, I believe there’s more to consider about a potential investment than just the amount of passive income it can deliver. So here’s what makes me want to avoid CBA shares right now.

Competition limiting growth

I think the banking environment has changed significantly over the past decade due to the rise of digital banking and mortgage brokers.

These days, smaller banks and lenders don’t need large branches to provide customers with the service they’re after. This has enabled lenders like Macquarie Group Ltd (ASX: MQG) and ING to increase their market share significantly.

In addition, loans appear to have become commoditised, and prospective borrowers are increasingly using mortgage brokers to help them choose the best loan. Price is a key factor, so lender net interest margins (NIMs) are being challenged. In the quarterly update for the period ending 31 March 2024, CBA said its net interest income was 1% lower than the prior corresponding period, partly due to “continued competitive pressures.”

Just think how many lenders there are on the ASX – CBA, Macquarie, Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Bank of Queensland Ltd (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN), AMP Ltd (ASX: AMP) and Pepper Money Ltd (ASX: PPM). That’s a lot of competition all vying to win volume.

High CBA share price valuation

Every business has a valuation, and we can compare different ASX shares based on certain metrics, such as the price-to-earnings (P/E) ratio or the price-to-book ratio (which compares a company’s market capitalisation to its balance sheet).

Last month, broker UBS said CBA shares were trading at a FY25 price-to-book ratio of 2.7x and a forward P/E ratio of 23x. That puts it among the most expensive banks in the world. The CBA share price is close to 5% higher than it was a month ago, making it even more expensive again.

Using UBS’ estimates, the Westpac share price is valued at 14x FY25’s estimated earnings, the ANZ share price is valued at 12x FY25’s estimated earnings and NAB is valued at 16x FY25’s estimated earnings.

So it seems CBA stock is much more expensive than its peers. I also think there are plenty of other ASX shares, and even industries, where we can find better opportunities that can deliver stronger earnings growth for their valuation. And UBS thinks CBA’s earnings per share (EPS) of $5.72 in FY25 and $5.78 in FY26 are expected to be lower than FY24’s EPS of $5.79.

Furthermore, it’s much harder to grow a huge ASX stock from $200 billion to $300 billion than a smaller business from $1 billion to $2 billion. The bigger a business becomes, the fewer customers it has to reach.

So, while CBA is not a bad company by any stretch, I believe there are many smaller investments on the ASX that could deliver better outcomes for shareholders.

CBA share price snapshot

Since the start of 2024, CBA shares have risen by around 10%. That compares to a rise of just 3% for the S&P/ASX 200 Index (ASX: XJO).

The post 1 popular ASX stock I’m steering clear of appeared first on The Motley Fool Australia.

More reading

• Are CBA shares losing their passive income credentials?
• Unstoppable! CBA share price smashes yet another record high
• Why you should sell CBA, Westpac, and Bank of Queensland shares in June
• Are ASX 200 bank shares a good investment right now?
• How the CBA share price defied the bears to surge in May

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

Over the long weekend, I wrote about how analysts at Goldman Sachs are feeling very bearish about Mineral Resources Ltd (ASX: MIN) shares. You can read about that here.

The broker believes the ASX mining stock is seriously overvalued and could be destined to crash deep into the red.

However, another broker doesn’t agree with this view and is urging investors to buy its shares right now.

What is the broker saying about this ASX mining stock?

According to a note out of Bell Potter, its analysts were pleased with news that the company has sold a 49% interest in the Onslow Iron Haul Road to Morgan Stanley Infrastructure Partners for gross proceeds of $1.3 billion. It commented:

The timing of the haul road sale is in-line with guidance, following the commencement of ship loading on 21 May 2024. Prior to the announcement, we had estimated MIN would achieve net after tax proceeds of A$1.1 billion for 49% of 50Mtpa of capacity. The sale is value accretive relative to our estimates as (1) higher net-proceeds will be realised relative to our estimate, and (2) a lower proportion of potential future tolling fees was sold (40 Mtpa vs 50 Mtpa).

In response to the news, the broker has reaffirmed its buy rating with a slightly trimmed price target of $84.00.

Based on the current Mineral Resources share price of $68.63, this implies potential upside of 22% for investors over the next 12 months.

What else did it say?

Bell Potter notes that the Onslow iron ore operations are now ramping up and this means that iron ore production is on the verge of increasing materially.

In light of this and expansions elsewhere in its portfolio, the broker believes the future is looking bright for the ASX mining stock. It concludes:

The commencement of the ramp-up of Onslow operations is the precursor to strong forecast Iron Ore and Mining Services earnings growth, with Stage 1 completion expected by June 2025. MIN is also advancing an unparalleled portfolio of growth options. We expect near-term news flow on (1) the expansion of Onslow to 50Mtpa, (2) development and financing options for MIN’s energy discoveries, with (3) details on lithium expansion timing at Wodgina and Bald Hill also possible. EPS changes are, FY24: 0%, FY25: -46%, FY26: -12% on increased forecast depreciation allowances. Our valuation reduces -1.2% as we increase forecast sustaining capital in FY25.

All in all, time will tell whether the bulls or bears make the right call on this one.

The post Don’t listen to the bears! Buy this ASX mining stock 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 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.

The ASX 200 index is home to the biggest and brightest shares that Australia has to offer.

Two that could be strong buys this month according to analysts at Bell Potter are listed below.

Here’s why they have been named on its favoured list in June:

GUD Holdings Limited (ASX: GUD)

The auto parts products company could be a top option for investors in June according to the broker.

It likes the ASX 200 share due to the resilience of its legacy auto business and exposure to improving new car sales. The broker commented:

The company recently reported an impressive FY23 result with NPAT of $119 million beating Citi forecast by 3% and consensus by 14%. This was driven by the better-than-expected APG performance (the highest-quality business in GUD, in our view) and the improvement in gearing. We see GUD as well-placed to benefit from the ongoing improvement in OEM supply constraints into FY24. Overall, our Buy rating for GUD is predicated on the relative resilience of the legacy auto business and improving momentum in new car sales, which should be favourable for APG’s earnings.

Bell Potter has a buy rating and $12.80 price target on GUD’s shares. This suggests that upside of 22% is possible over the next 12 months. A dividend yield of ~3.5% is also expected from its shares over the same period.

Transurban Group (ASX: TCL)

Another ASX 200 share that has been given the thumbs up by analysts at Bell Potter this month is Transurban. It is a toll road operator with a portfolio of important roads across Australia and North America.

Bell Potter likes the company due to its low risk cash flow, positive exposure to inflation, and its significant growth pipeline. It explains:

We believe the current inflationary environment is favourable for Transurban given its inflation-linked revenue stream with annual escalators. Moreover, TCL provides low risk cash flows over the long term, with long concession duration (30+ years), and relative traffic/income resilience. The group’s current pipeline of growth projects is $3.3 billion (TCL’s share of total project cost) and further huge development opportunities are expected over the next few decades, supported by population and economic growth.

The broker currently has a buy rating and $15.50 price target on its shares. This implies potential upside of 21% for investors from current levels. In addition, it is expecting a dividend yield in the region of 5%.

The post Bell Potter says these ASX 200 shares are strong buys with 20%+ upside 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 Transurban 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.