Tag: Fool

Top broker Goldman Sachs has a sell rating on three popular ASX retail shares amid today’s high interest rates, weak retail sales, and the most protracted period of negative consumer sentiment in 30 years.

In a recent note, Goldman analysts Lisa Deng and James Leigh said there is “better value” in ASX consumer staples than discretionary shares right now.

They noted that several ASX discretionary retail shares were trading at elevated price-to-earnings (P/E) ratios, and the broker’s earnings forecasts for FY25 on those stocks were 5% to 10% below consensus.

The shares include JB Hi-Fi Ltd (ASX: JBH), Flight Centre Travel Group Ltd (ASX: FLT), and Premier Investments Limited (ASX: PMV), and in a new ratings update the broker has a sell rating on all of them.

The state of play in retail

The latest Westpac Consumer Sentiment data reveals persistently low consumer sentiment over the past two years that shows “few signs of lifting”, according to senior economist Matthew Hassan.

Hassan commented:

Indeed, outside of the deep recession of the early 1990s, this is easily the second most protracted period of deep consumer pessimism since we began surveying in the mid-1970s, with all other sentiment slumps lasting nine months or less.

Deng and Leigh said shoppers were “clearly increasingly value-focused” amid likely delays in rate cuts. (The broker recently changed its projected timeline for a rate cut from August to November.)

The latest retail figures from the Australian Bureau of Statistics (ABS) support this view. The data revealed the “weakest growth on record” outside the pandemic and the introduction of the GST.

Retail turnover rose by just 0.8% over the 12 months to 31 March, despite significant population growth.

Turnover fell by a seasonally adjusted 0.4% in March, following a 1% lift in January and a 0.2% rise in February.

ABS head of retail statistics Ben Dorber said consumers had pulled back on spending in March amid high cost-of-living pressures.

3 ASX retail shares to sell

Deng and Leigh commented that recent 3Q24 company results, channel checks, and the latest ABS retail data suggested Australian consumers were “increasingly price-conscious and selective about spending”.

In their recent note, Deng and Leigh re-rated several ASX retail shares.

Their recommendations included six shares to buy, seven with neutral ratings, and three to sell, as follows.

JB Hi-Fi shares

The JB Hi-Fi share price is $57.53, up 1.72% currently and up 5.7% in the year to date.

Goldman has a 12-month share price target of $50 on this popular ASX retail share.

Deng and Leigh downgraded JB Hi-Fi shares from a neutral to sell rating, commenting:

We cut FY24-26e EBIT by 3-4% and EPS by 3-5% given softer growth in the Electronics category as well as rising competition, particularly for JBH AU, most noticeably from Officeworks.

Our FY25e EBIT and EPS are ~6% below Factset consensus.

Premier Investments shares

The Premier Investments share price is $29.59, down 0.37% currently and 4.89% higher in the year to date.

Goldman has a 12-month share price target of $25.10 on the owner of Just Jeans and Peter Alexander.

Flight Centre shares

The Flight Centre share price is $20.58, up 0.68% currently and 0.64% higher in the year to date.

Goldman has a 12-month share price target of $18.30 on this ASX retail travel share.

The post Dump ’em! Top broker says sell these 3 ASX retail shares appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Here’s how the ASX 200 market sectors stacked up last week
• Buy one, sell the other: Goldman’s verdict on these 2 ASX 200 travel shares
• Why IDP Education, JB Hi-Fi, PYC, and Renascor shares are falling today
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Bronwyn Allen 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 Flight Centre Travel Group, Jb Hi-Fi, and Premier Investments. 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) closed up a stellar 1.4% on Tuesday 7 May.

This great run was fuelled by the Reserve Bank of Australia’s meeting on the day, which saw the central bank leave Australia’s official interest rate steady at 4.35%.

However, the minutes of the RBA’s meeting, released today, reveal that ASX 200 investors came closer than many expected to witnessing another rate hike as the inflation outlook remains highly uncertain.

The ASX 200 is down 0.2% in early afternoon trade today.

Here’s what we learned from the RBA’s inflation outlook and interest rate expectations.

ASX 200 investors dodged a rate rise bullet

It turns out the speculations of another potential 2024 interest rate increase from the RBA weren’t so far out of the ballpark after all.

And judging by the tone of the RBA board’s minutes, ASX 200 investors shouldn’t write off this possibility just yet.

In the meeting, chaired by Governor Michele Bullock, the RBA noted:

Raising the cash rate at this meeting could be appropriate if the board formed a view that the judgements underpinning the staff forecasts risked being overly optimistic about the forces that would drive down inflation, leaving the balance of risks tilted to the upside.

Among the bigger inflationary concerns that could lead to ASX 200 investors having to bear another rate hike is Australia’s tight labour market.

“Labour market conditions had eased by less than had been anticipated three months earlier,” the RBA said. “Conditions in the labour market appeared to be tighter than those consistent with full employment.”

The board also noted that while inflation had eased further in the March quarter “the pace of disinflation had slowed and the recent inflation data were stronger than had been expected in February”.

Indicating how close Australia was to another interest rate hike, the RBA said “Most of the data received since the previous meeting had been stronger than expected.”

According to the minutes:

Taken together, these data suggested that there may be somewhat less slack in the economy than previously assessed. Inflation in Australia had declined more slowly than anticipated. Conditions in the labour market had eased by less than expected over prior months and were tighter than those consistent with full employment.

In what was good news for the ASX 200 on the day, the final decision was to leave the cash rate unchanged.

At least, for now.

“Members agreed that it was important to convey that recent data and other information had signalled that the risks around inflation had risen somewhat,” the board highlighted.

Noting “the considerable uncertainty about the outlook for both inflation and the labour market”, the RBA’s board members “agreed that it was difficult either to rule in or rule out future changes in the cash rate target”.

The post The ASX 200 was almost hit by an RBA interest rate hike in May. Now what? appeared first on The Motley Fool Australia.

More reading

• Star Entertainment share price dives 10% on Hard Rock update
• Telstra share price slips amid 2,800 cuts for growth
• 2 great value ASX shares I want to buy
• Rio Tinto share price sinks amid gas woes
• ASX 200 tech stock lifts off on another record-setting half-year profit

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

The Star Entertainment Group Ltd (ASX: SGR) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) casino operator were down 10.1% in earlier trade at 48.5 cents. After some likely bargain hunting, shares have recouped much of those losses, currently trading for 52.5 cents apiece, down 2.8%.

For some context, the ASX 200 is down 0.2% at this same time.

This comes after another update on media speculations surrounding potential takeover discussions with Hard Rock International.

Hard Rock responds

As the Motley Fool reported yesterday, Star had confirmed media rumours saying it has received interest from “a number of external parties regarding potential transactions”.

Management noted that they were not yet in “substantive discussions”. But that didn’t stop the Star Entertainment share price from soaring after coming out of the morning trading halt, ending the day up 20.0%.

The big rally may have been driven by the rumours of Hard Rock’s potential interest in the stock.

Yesterday, The Australian Financial Review cited sources close to Star had indicated Hard Rock Hotels and Casinos was among those external parties potentially interested in acquiring the embattled casino operator.

Overnight, the United States-based global chain denied that in no uncertain terms.

According to Hard Rock:

Any misuse of the Hard Rock name in unauthorised business dealings is taken very seriously. We are currently investigating this matter and will pursue all necessary legal actions to protect our brand and reputation.

Star Entertainment released an update in response to the media speculation during trading hours yesterday.

“The Star confirms that it has not received a proposal directly from Hard Rock Hotels and Casinos (Hard Rock),” the company noted.

Star continued:

However, the company has received inbound interest from a number of other external parties regarding potential transactions including a consortium of investors which includes the entity Hard Rock Hotels & Resorts (Pacific), which The Star understands is a local partner of Hard Rock.

The nature of the interest to date has been confidential, unsolicited, preliminary and non-binding. At this stage, none of the approaches has resulted in substantive discussions.

To clarify its position following Hard Rock’s litigation threats, Star Entertainment followed up with another statement this morning:

The company today notes the statement issued by Hard Rock International which clarifies that Hard Rock International is not involved in, nor has it authorised, any discussions, activities or negotiations on its behalf in connection with a proposal for The Star.

Star Entertainment share price snapshot

The Star Entertainment share price is down 55% over the past full year. But shares in the ASX 200 casino operator look to have found support over the past months, with shares down just over 1% in 2024.

The post Star Entertainment share price dives 10% on Hard Rock update appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Why Gentrack, New Hope, Nuix, and Star Entertainment shares are charging higher
• Are Star shares now rolling the dice on a rescue bid?
• 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 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 Telstra Group Ltd (ASX: TLS) share price is weakening on news the telecom giant plans to oust up to 2,800 employees.

Despite the move being marketed as necessary, shares in Australia’s thirteenth-largest listed company are down 2.1% to $3.60 in light of the update. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) — Australian investors’ yardstick — is only 0.1% lower.

Resetting costs during ‘ongoing inflationary pressures’

Today, Telstra announced it will begin a ‘reset’ of its enterprise business. Up to 2,800 employees are expected to be removed as part of this restructuring.

The decision follows a review of the declining product segment, which experienced a 66.7% fall in earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the first half of FY2024. Telstra noted a decline in connectivity and calling at that time, dragging the division’s EBITDA down from $213 million to $71 million.

Telstra CEO Vicki Brady described the impetus behind the decision, saying it’s needed to accommodate continued investments to deal with ‘ever-increasing growth in data volumes’ and provide better connectivity for its customers.

Yet, the Telstra share price is still moving lower today.

Additionally, Brady highlighted the tough backdrop Telstra is facing, stating:

This is occurring within a dynamic environment, with an evolving competitive landscape, rapid advances in technology, changing customer needs, and the ongoing inflationary pressures facing all businesses.

To reduce costs, Telstra highlights the following key items:

• Reducing the number of network applications and services (NAS) products by almost two-thirds
• Simplifying its sales and service model, and
• Reducing the cost base of its tech services, with a particular focus on NAS products

Telstra management expects the majority of the cuts will be complete by the end of the year.

Finally, the telco is also scrapping annual inflation-linked postpaid mobile plan price reviews.

What about earnings guidance?

Making swift and broad cuts comes at a cost. Telstra is pencilling in $200 million to $250 million in one-off restructuring costs between FY24 and FY25. Although, these costs will not be included in the company’s guidance.

Speaking of which… Telstra reaffirmed its FY24 guidance and pulled back the curtain on FY25. The company forecasts $8.4 billion to $8.7 billion in underlying EBITDA in the next financial year, reassuring investors that it is committed to achieving its ‘T25’ goals.

Has the Telstra share price lagged the market?

The Telstra share price is down 16% compared to last year. This is a distinct departure from the return of the Australian benchmark, which was roughly 8% over the same timeframe.

Even after dividends, Telstra’s returns over the past 12 months are negative. Profits have increased slightly during this time. However, revenue and net profits after tax remain noticeably lower than at the end of 2018.

The post Telstra share price slips amid 2,800 cuts for growth appeared first on The Motley Fool Australia.

More reading

• Should you buy Telstra stock on a pullback?
• Top ASX dividend shares to buy in May 2024
• Here are 3 reliable ASX shares I’d buy instead of the big four banks right now
• With $1,000 to invest, should I buy ASX growth stocks or income shares?
• How much could $10,000 invested in Telstra shares be worth next year?

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

I’m always on the lookout for ASX shares that seem too cheap to ignore. Buying great value stocks can lead to outperforming the S&P/ASX 200 Index (ASX: XJO) over the longer term.

Cheap can mean several different things, such as trading at a large discount to the business’ net asset value (NAV). In this article, I’ll focus on companies that trade on a low price/earnings (P/E) ratio.

I believe the market is materially undervaluing the long-term growth prospects of the below ASX shares.

GQG Partners Inc (ASX: GQG)

GQG is a funds management business based in the US. One of the stock’s appealing factors is that it’s growing geographically in places like Canada and Australia, expanding its potential customer base.

The company has deliberately set up its funds to have minimal (or no) performance fees, meaning management fees generate the significant majority of its revenue and profit. Therefore, higher funds under management (FUM) is a key driver of earnings.

At 31 December 2023, GQG had FUM of US$120.6 billion. The FUM rose 17.7% to US$142 billion at 30 April 2024, driven by strong investment performance and net inflows of US$6.3 billion for 2024 to date. I’m expecting more inflows over the rest of 2024 with clients attracted to GQG’s funds’ ability (thus far) to deliver long-term outperformance of their respective benchmarks.

The ASX share has committed to a generous dividend payout ratio of 90% of distributable earnings. Based on the forecast on Commsec, the GQG share price is valued at under 11x FY25’s distributable earnings, which looks cheap to me.

Close The Loop Ltd (ASX: CLG)

This company is heavily involved in the circular economy.

It collects, sorts, reclaims and reuses resources and materials that would otherwise go to landfill, such as electronic products, print consumables and cosmetics. Close The Loop also enables the reusing of toner, and utilises post-consumer plastics for an asphalt additive. Finally, the company creates packaging that includes recyclable and made-from-recycled content.

In a world where countries, companies and households are looking to reduce their impact on the planet, this company operates in an attractive area of the economy with growth tailwinds.

The financials are going in the right direction. In the FY24 first-half result, revenue rose 76% to $103.1 million, the operating profit rose 97% to $12.4 million and the operating cash flow increased 105% to $12.3 million. The growth was particularly strong in that period thanks to the acquisition of ISP Tek Services.

The ASX share is beating growth expectations, leading management to upgrade the earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance to between $44 million and $46 million for FY24.

How cheap is it? According to the forecast on Commsec, it’s trading at an incredibly low 6x FY25’s estimated earnings. I’m looking to buy more Close The Loop shares when I have the capital to do so.

The post 2 great value ASX shares I want to buy appeared first on The Motley Fool Australia.

More reading

• 1 overlooked ASX growth stock I’m chasing for multibagger potential
• How to choose ASX shares for passive income
• Why I’m bullish about this ASX stock and recently bought more!
• 2 ASX shares ready for dividend hikes in 2024
• Why Block, GQG, Helloworld, and Xero shares are racing higher today

Motley Fool contributor Tristan Harrison has positions in Close The Loop. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Close The Loop. The Motley Fool Australia has recommended Close The Loop. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Rio Tinto Ltd (ASX: RIO) share price is in the red today.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining stock closed yesterday trading for $135.87. In morning trade on Tuesday, shares are changing hands for $134.96 apiece, down 0.7%.

For some context, the ASX 200 is down 0.2% at this same time.

The Rio Tinto share price is under selling pressure amid news that the company is pausing alumina shipments to third parties from its Queensland refineries.

Rio Tinto share price slips on alumina disruptions

Citing sources wishing to remain anonymous, The Australian Financial News reports that the ASX 200 miner has declared force majeure on its Queensland alumina shipments.

A force majeure, if you’re not familiar, relates to any force of nature (or man) that’s well beyond a company’s control. Like wild weather, war, or in Rio Tinto’s case, a shortage of gas to power its alumina refineries.

For its full-year results, reported in February, Rio Tinto noted:

Alumina production of 7.5 million tonnes was unchanged from 2022, with the Yarwun and Queensland Alumina Limited (QAL) refineries showing improved operational stability.

Alumina is the raw material that is processed into the aluminium we’re all more familiar with.

The anonymous sources said Rio Tinto’s refineries haven’t been able to produce at normal capacity due to regional gas shortages impacting the East Coast. Back in March, the miner reported fires in the state could have impacted the gas pipelines that supply Yarwun.

The miner’s own aluminium operations are not expected to be impacted.

The Rio Tinto share price remains up 25% over 12 months.

The post Rio Tinto share price sinks amid gas woes appeared first on The Motley Fool Australia.

More reading

• Why brokers just revised their outlook for these 4 top ASX All Ords shares
• ASX 200 mining stocks flying higher on ‘most relaxed’ Chinese stimulus ever
• Buy 300 shares in this glorious ASX 200 dividend stock and create almost $2,000 in passive income
• ASX 200 mining shares charging higher amid China’s $210 billion cash injection
• Buy Rio Tinto and these ASX 200 dividend shares

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

S&P/ASX 200 Index (ASX: XJO) tech stock Technology One Ltd (ASX: TNE) is marching higher today.

The TechnologyOne share price closed yesterday at $16.02. In morning trade on Tuesday, shares are swapping hands for $16.14 apiece, up 0.75%.

For some context, the ASX 200 is down 0.1% at this same time.

This comes following the release of the software company’s half-year results for the six months ending 31 March.

Read on for the highlights.

ASX 200 tech stock marching higher on revenue and profit boost

• Total revenue of $244.8 million, up 16% year on year
• Total annual recurring revenue (ARR) of $423.6 million, up 21%
• Profit after tax of $48.0 million, up 16% from the prior corresponding period
• Total expenses of $183.2 million, up 16% year on year
• Record interim dividend of 5.08 cents per share franked at 65%, up 10% from the prior interim dividend

What else happened for Technology One during the half year?

Other key metrics that look to be helping boost the ASX 200 tech stock include the 117% net revenue retention for the half year, exceeding management’s target by 2%.

TechnologyOne also reported a 21% increase in revenue from its SaaS and recurring business, which came in at $223.1 million.

Management noted that, as expected, cash flow generation was negative $3.8 million for the six months. However, they noted that cash flow generation will be strong over the full year.

On the research front, R&D investment (before capitalisation) also increased by 15% year on year to $56.9 million. This represents 24% of the company’s revenue.

And the United Kingdom business was a strong performer with ARR in the UK up 36% to $28.8 million.

As at 31 March, TechnologyOne held cash and investments of $172.0 million, up 24% from last year.

Impressively, this marks the 15th year of record first-half profit, revenues, and SaaS fees.

What did management say?

Commenting on the results boosting the ASX 200 tech stock today, CEO, Ed Chung said, “These are strong half year results for TechnologyOne and validate the strength of our SaaS strategy, which continues our strong growth trajectory in both Australia and the UK.”

Chung continued:

Net revenue retention (NRR), which is the net amount of new ARR from existing customers, was 117% for the 12 months to 31 March. This was an outstanding result given that best-in-class in the ERP market is considered between 115% and 120%.

We expect to meet our 115% target for the full year. By growing NRR at 115%, we can double the size of our business every five years, which shows the strength and resilience of our strategy and deep customer relationships

What’s ahead for the ASX 200 tech stock?

Looking at what could impact the ASX 200 tech stock in the months ahead, the company’s FY 2024 guidance foresees a 12% to 16% increase in profit.

This is expected to be driven by ARR growth of 15% to 20% and net profit before tax margin growth of around 1% for the full year.

Guidance for FY24 – profit up 12% to 16%, underpinned by strong ARR growth up 15%-20% and net profit before tax margin growth of approximately 1% for the full year.

“We expect strong growth for the full year FY 2024 and the company sees significant growth opportunities in the coming years,” Chung said.

Looking at what’s further ahead for the ASX 200 tech stock, Chung added:

We are on track to surpass total ARR of $500 million-plus by FY 2025, from our current base of $424 million. We will continue to invest for the long-term in R&D to build platforms for growth to continue to double in size every five years.

TechnologyOne share price snapshot

With today’s intraday moves factored in, the ASX 200 tech stock is up 6% so far in 2024.

The post ASX 200 tech stock lifts off on another record-setting half-year profit appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• These ASX 200 shares could rise 15% to 50%
• 5 stellar ASX growth shares to buy for strong returns
• How ASX growth shares can become top dividend stocks
• What are 3 of the safest ASX 200 tech shares in Australia right now?

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 positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. 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.

Nvidia (NASDAQ: NVDA) has risen to become a nearly $1,000 stock again, which is usually a threshold where investors start to expect a stock split. While there’s no hard and fast rule about when to expect a split (some companies never do), history tells us that Nvidia could be considering one now.

Additionally, May 22 may be the day that one is announced, which is right around the corner. The last time Nvidia announced a stock split, the stock went wild and rose significantly. So, should you buy ahead of this potential announcement?

The last stock split was announced at a similar time in 2021

The last time Nvidia enacted a stock split was on July 20, 2021. That four-for-one split broke each Nvidia share into four separate pieces, thus increasing the share count fourfold and cutting the stock price to 25% of its original value. Without this split, Nvidia’s stock would be around $3,600 today.

However, the timing of this last split announcement sets the stage for a potential announcement on May 22 during its first-quarter fiscal year 2025 earnings release. In its Q1 fiscal year 2022 earnings release (which occurred on May 26, 2021), Nvidia announced to shareholders that the board of directors agreed to split the stock. This is perfect timing, as the annual meeting of stockholders was set to occur only a few weeks later so that shareholders could approve the vote. At that time, Nvidia was trading at around $600, so the stock is far more expensive today than when it decided to split its stock.

With the stage set for nearly the same scenario three years later, I would not be surprised if Nvidia announced a stock split on May 22. The question is, will it ignite a run-up like it did last time? After Nvidia’s Q1 results were announced, up until the stock split date, the stock went on an impressive tear.

NVDA data by YCharts

With the stock rising 30% in the days after the stock-split announcement, who wouldn’t want to get ahead of that movement? However, investors should not expect that kind of reaction again.

Should Nvidia’s stock increase by 30% from current levels, its market cap would increase from $2.3 trillion to roughly $3 trillion. That would allow Nvidia to surpass Apple as the second-largest company in the world and put it within striking distance of Microsoft as the largest company in the world.

I doubt that a stock-split announcement will create nearly $700 billion in value. Fortunately, there are other reasons to buy the stock.

Nvidia’s growing business is driving the stock price higher

While the threshold where companies split their stocks differs for each business, the reason remains the same: Their stock price has gotten too expensive. This occurs because the business is succeeding — a great problem to have.

Nvidia’s business has been on fire lately, with its graphics processing units (GPUs) selling at an unbelievable pace to satisfy the demand for data centers built to power the artificial intelligence (AI) arms race.

Any stock movement from a potential stock-split announcement should be attributed to its GPU business, as it’s the driving force behind the stock. With management guiding investors for Q1 revenue of about $24 billion (indicating 234% growth), we’re slated to see a monster quarter reported again.

While a stock-split announcement may be coming, investors should look beyond that to determine if Nvidia is a potential buy (or not). 

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

The post History says an Nvidia stock-split announcement might be coming on May 22 appeared first on The Motley Fool Australia.

More reading

• Nvidia stock’s next big catalysts could come on May 22. Should you buy shares before then?
• 3 reasons to buy Nvidia stock before May 22 (and 1 reason to sell)
• What exactly does Nvidia do?
• 2 US artificial intelligence (AI) stocks that could beat Nvidia in the coming decades
• Is it too late to buy Nvidia stock?

Keithen Drury 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 Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vanguard Australian Shares Index ETF (ASX: VAS) is a leading exchange-traded fund (ETF) that enables Aussies to invest in the S&P/ASX 300 Index (ASX: XKO). The dividend-paying nature of many of the large blue chips in the portfolio can appeal to retirees.

ASX ETFs can provide a very simple way for investors to track the performance of a particular share market or industry. Low fees are one of most appealing qualities of index funds like the VAS ETF.

We’re going to look at how effectively the VAS ETF can help grow our wealth.

Strong dividend income

An ETF passes any dividends it receives onto investors, so if the underlying holdings have a good dividend yield, the VAS ETF can provide a solid overall dividend yield as well.

According to Vanguard, the Vanguard Australian Shares Index ETF has a dividend yield of 3.7% (which doesn’t include the franking credits).

That high yield is thanks to sizeable allocations to stocks like BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC) and ANZ Group Holdings Ltd (ASX: ANZ).

If someone’s portfolio has a higher dividend yield, it means they don’t need as large a wealth balance to generate a targeted amount of dividend income. For example, a $1 million portfolio with a 3.7% dividend yield generates $37,000 in annual dividends. If a fund had a 2% dividend yield, someone would need to have a $1.85 million balance to receive the same $37,000 of cash flow.

On this side of things, the VAS ETF can help people retire earlier. Reaching a lower balance is more attainable for investors.

Slower capital growth

ASX blue-chip shares like BHP, CBA and the other ASX bank shares are not known for delivering strong capital growth compared to global stocks like Alphabet, Microsoft, Nvidia and Amazon which have grown enormously over the long term.

The heavy influence of the banks and miners on the ASX 300 has resulted in quite slow capital growth for the VAS ETF. In the past ten years, the ASX ETF has achieved average capital growth per annum of 3.2%, and in the last three years, it has seen average capital growth of just 1.9% per annum.

Even with the dividends, the total return (dividends plus capital growth) of the VAS ETF over the past three years and ten years has been an average of 7.1% and 7.7%, respectively.

Compare those returns to the Vanguard MSCI Index International Shares ETF (ASX: VGS) – an ETF focused on the global share market – which has returned an average of 12.7% per annum since inception in November 2014.

If someone invested $1,000 a month for 20 years and the investment produced an average return of 12.7%, it would become worth $938,000.

Investing $1,000 per month for 20 years in an investment that produced an average of 7.7% per annum would grow to $531,000.

That’s a big difference and shows how important capital growth is. However, the global share market isn’t guaranteed to continue its long-term outperformance.

For someone wanting to reach a certain investment balance, the VAS ETF has not demonstrated as strong a performance as globally-focused funds like the VGS ETF.

Foolish takeaway

The Vanguard Australian Shares Index ETF is a decent option at under $100 per unit for investors looking to receive dividend income.

The VAS ETF can help investors reach retirement, but other options could deliver stronger total returns, which may be more helpful for bringing forward an early retirement.

The post Could buying the Vanguard Australian Shares Index ETF (VAS) at under $100 help me retire early? appeared first on The Motley Fool Australia.

More reading

• How I plan to invest my tax cuts
• How much money should I put in one ASX ETF?
• 3 things about Vanguard Australian Shares Index ETF (VAS) every smart investor knows
• Why did the Vanguard Australian Shares Index ETF (VAS) fall 4% in April?
• Buy these excellent ASX ETFs for your income portfolio in May

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Microsoft, Nvidia, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Commonwealth Bank of Australia (ASX: CBA) share price has soundly outperformed the S&P/ASX 200 Index (ASX: XJO) in the last six months, rising by 17% compared to the index’s 11% increase.

After such a strong run, investors may be questioning whether the ASX bank share can still be a good investment with the price/earnings (P/E) ratio now above 20.

The higher the earnings multiple valuation goes, the more risk there is of overpaying. Valuation itself can be an issue with an investment.

Expert’s rating on CBA shares

Writing on The Bull, Arthur Garipoli from Seneca Financial Solutions has called Australia’s biggest bank a sell.

He gave his verdict after looking at the FY24 third-quarter result which was “marginally better than expected”. Garipoli noted the CBA update reflected “similar themes to its peers”. The expert then said:

We note a decline in net interest margins and lower revenue growth coupled with increasing cost pressures. We acknowledge CBA is the premier bank, but we can’t justify its valuation premium compared to competitors. Investors may want to consider taking a profit.

The quarterly profit generated by the bank was approximately $2.4 billion, down 5% year over year. CBA reported a loan impairment expense of $191 million, with collective and individual provisions “slightly higher”. The bank said its lending portfolio’s credit quality remained “sound”, though there were “moderate increases in both consumer arrears and corporate troublesome exposures”.

Valuation premium compared to other ASX bank shares

There are a few different ways to value a business, with the P/E ratio being one of the easiest methods.

As mentioned above, CBA shares are trading on a much higher earnings multiple than peers. According to the (independent) forecast on Commsec, the CBA share price is valued at 21x FY24’s estimated earnings.

Now, let’s compare that to the other major banks using the forecasts on Commsec.

The ANZ Group Holdings Ltd (ASX: ANZ) share price is valued at 12.6x FY24’s estimated earnings.

The Westpac Banking Corp (ASX: WBC) share price is valued at 14.5x FY24’s estimated earnings.

The National Australia Bank Ltd (ASX: NAB) share price is valued at 15.4x FY24’s estimated earnings.

Based on those numbers, CBA’s P/E ratio is 36% more expensive than NAB’s and over 66% more costly than ANZ’s.

Foolish takeaway

CBA is an excellent bank – that’s why investors value it so highly.

However, the high CBA share price means it’s much more expensive than its peers. The rise of the CBA share price has also pushed the current grossed-up dividend yield down to 5.3%.

Based on all of the above factors, it may be better to give CBA shares a miss until the forward P/E ratio becomes more attractive.

The post Would I be crazy to buy CBA shares at $121? appeared first on The Motley Fool Australia.

More reading

• Why is the CBA share price setting a new all-time high today?
• Here’s what Wilsons is saying about ANZ, CBA, NAB, and Westpac shares
• Is the CBA share price heading back to $100?
• Inherited a substantial sum of money? Here’s how I’d spend it (including the ASX stocks I’d buy)
• 4 founder-led ASX 300 shares that have helped this fund outperform

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.