Tag: Motley Fool Australia

The Commonwealth Bank of Australia (ASX: CBA) share price has certainly been on a rollercoaster over the past few months. It was only back in February that CBA shares were trading over $90 a share.

Today, you can get the same shares for just $60.07 (at the time of writing), not too far off the lows of $53.44 we saw in March.

On current prices, CBA shares are offering a trailing dividend yield of 7.17%, which grosses-up to 10.24% with CommBank’s full franking credits.

But is this dividend yield too good to be true?

All three of the other big four ASX banks have proved to be dividend traps in 2020 so far. National Australia Bank Ltd. (ASX: NAB) has slashed its 2020 interim dividend to just 30 cents per share (down from 86 cents per share last year).

And it’s likely that Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) won’t be paying an interim dividend at all this year. Both banks have ‘deferred’ their shareholder payouts until further notice.

So what’s the story with Commonwealth Bank? CBA is generally regarded to be the best ASX bank on the market by investors. We can see this through the higher price-to-earnings ratio that CommBank has always and continues to command compared with the other ASX banks.

Are CBA shares a dividend trap?

Well, Commonwealth Bank has already paid a dividend in 2020 – an interim dividend of $2 that was steady with the 2019 payout.

But its 2020 final dividend is scheduled for a September payout, and it’s very unclear whether this payout will go ahead at all. The only thing we know is that it probably won’t be matching the 2019 final dividend of $2.31 a share.

All of the ASX banks are being caught in a gale of nasty headwinds right now. Economic activity is being severely depressed by the coronavirus and associated lockdowns. Businesses and consumers alike will struggle to service existing loans in 2020, let alone take out new ones.

And interest rates remain at virtually zero (0.25%) and look set to remain so until at least 2022, if the Reserve Bank of Australia’s guidance is anything to go by. It becomes much harder for banks to generate profits when interest rates are at these levels.

On the bright side, CommBank’s capital position remains strong, and (I would say) better than the other ASX banks. Its coffers have also recently been boosted by the partial sale of Colonial First State.

But combining all of these factors still point to reduced dividends from Commonwealth Bank for the rest of 2020 and going into 2021.

Foolish takeaway

We might see a dividend from CBA later this year, but even if we do, it’s not likely to be close to what shareholders have become used to. Thus, Commonwealth Bank is certainly a dividend trap (in my view) if you are expecting a 7.17% yield this year. As for the future? We’ll just have to wait and see.

More reading

• Are NAB shares a bargain buy?
• Why the Commonwealth Bank share price is the best buy among the Big 4 banks
• ASX 200 down 0.2%: Big four banks lower and TPG announces demerger plans
• Are ASX bank shares worth buying despite dividend cuts?
• Is it time to buy ASX banks?

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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A recent report from broker UBS has predicted that online sales will double post-pandemic, with a slew of traditional retailers expected to close shop permanently.

The report follows data from the Australian Bureau of Statistics released yesterday, which revealed that retail spending fell a record 17.9% in April. Social distancing and travel restrictions have sapped demand from traditional retail outlets, with consumers moving to online platforms.  

Here are 3 retail shares on the ASX that have outperformed during the pandemic and are well poised to adapt to the new age of retail.

Adairs Ltd (ASX: ADH)

Adairs is a home furnishings retailer that boasts more than 160 speciality stores in Australia and New Zealand. In addition to physical stores, the company also has a robust and growing online presence. Adairs recently released a trading update, informing the market that online sales surged 221% for the 5 weeks that stores have been closed.

Despite only contributing 20% to Adairs’ total sales, strong growth in online transactions has resulted in Australian sales over the period only being down approximately 37% compared to last year. Since 23 March, the Adairs share price has surged more than 285%, reflecting substantial interest from investors.

Kogan.com Ltd (ASX: KGN)

Kogan.com is probably one of the most prominent online retailers on the ASX. The company has been on the receiving end of huge demand as consumers flock to stock up on essential and discretionary items. Kogan released a trading update recently which reported a 100% growth in gross sales and 150% increase in gross profit for April.

The company also saw the largest monthly increase in active customers since its IPO. This surge in demand has been reflected in the Kogan share price which has bounced more than 155% from its March low. Kogan also made headlines recently, announcing that it had acquired furniture and homeware retailer, Matt Blatt.  

Temple & Webster Group Ltd (ASX: TPW)

Believe it or not, the Temple & Webster share price has recovered more than 155% from its low in March and is currently trading near all-time highs. Temple & Webster is Australia’s largest online retailer of furniture and homewares and has thrived during the coronavirus pandemic.

The company recently provided an update, reporting record numbers in new and repeat customers, whilst also reporting that second-half revenue (to 24 April 2020) had increased by 74% year-on-year.  

Foolish takeaway

The move online is not only limited to traditional ASX retail shares. Even essential stalwarts like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) have seen a surge in online participation and are preparing to meet future demand by investing heavily in the segment.

I think a prudent strategy for investors is to compile a watchlist of ASX retailers that will thrive in the next 20 years and wait for a good buying opportunity.

More reading

• Is the Wesfarmers share price in the buy zone?
• Down 10% in 2 months. Are Coles shares a buy today?
• Aussie retail numbers paint a gloomy ASX picture
• $2,500 invested in these 3 ASX shares could make you a fortune in 10 years
• The Bubs share price is up 20% in May, will it catch up to the A2 Milk share price?

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Aristocrat Leisure Limited (ASX: ALL) share price could be on the move this morning following the release of the gaming technology company’s half year results.

How did Aristocrat Leisure perform in the first half?

For the six months ended March 31, Aristocrat posted a 7% increase in operating revenue to $2,251.8 million. This was driven by a 27.3% increase in Digital segment revenue to $1,044.6 million, which offset declines in its Land-based segments.

However, due to the lower share of Land‐based revenue because of COVID‐ 19 impacts and its investments in user acquisition for its Digital portfolio, the company’s EBITDA margin fell 5 percentage points to 31.4%.

This led to normalised EBITDA falling 7.7% on the prior corresponding period to $707.6 million and normalised NPATA dropping 12.8% to $368.1 million.

On a reported basis, NPATA jumped 232.1% to $1,367.4 million. This was due to a one-off ~$1 billion deferred tax benefit. This follows group structure changes announced in November 2019, which are expected to generate long term cash tax savings.

As was widely expected, Aristocrat has decided to suspend its dividend in order to enhance its liquidity position and balance sheet.

Land-based segment.

During the half, Aristocrat’s Class III Premium installed base grew 9.4% and its Class II installed base grew 1.8%.

Management notes that this was driven by continued penetration of leading hardware configurations and high-performing game titles.

Its market-leading average fee per day (pre-COVID-19 casino closures) increased 0.3% to US$50.20. On an unadjusted basis, the average fee per day for the period was just above US$46.

Digital segment.

The growing Digital business was the star of the show during the half. It delivered double-digit growth in bookings, revenue, and profit during the half.

The RAID: Shadow Legends game was a highlight, continuing its impressive growth trajectory by generating US$160 million in bookings over the six months. This was supported by additional targeted user acquisition (UA) investment.

Speaking of which, the company’s total UA spend grew to 29% of Digital revenue in the period. This was due to the availability of quality investment opportunities.

Another big positive was its growth in Average Bookings Per Daily Active User (ABPDAU). It grew over 30% to US$0.50 due to management’s successful focus on monetisation and the scaling of RAID: Shadow Legends.

Management commentary.

Aristocrat’s chief executive officer and managing director, Trevor Croker, was pleased with how the company performed given the challenging trading conditions.

He commented: “Aristocrat delivered a result for the half year to 31 March 2020 that demonstrates our core strengths and the relevance of our product-led strategy, despite the unprecedented challenges generated by the COVID-19 pandemic.”

“Our progress in driving share through outstanding product and diversifying revenue streams – including across attractive Digital genres and titles – are also evident in this result,” he added.

Looking ahead, the chief executive remains focused on growing the business when trading conditions improve.

He said: “We will also continue to drive our strategic advantages in product, with aggressive investment in our core growth engines of Design and Development and User Acquisition to target share and continue to diversify our portfolios.”

“In Land-based, we will execute our ambitious plans to partner and grow with our customers as conditions improve. And in Digital, we will accelerate execution of our portfolio-based growth strategy as we further mature and scale the organisation,” Croker added.

No guidance was given for the second half, which is understandable given the current environment.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why this ASX 200 stock could surge higher tomorrow
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• Leading brokers name 3 ASX shares to buy today
• Why Aristocrat Leisure, Newcrest, Santos, & Zip Co shares are charging higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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ASX tech shares have not all enjoyed the same fortune in 2020. While the S&P/ASX 200 Index (ASX: XJO) has slumped 16.62% this year, investors have struggled to value many of our largest listed technology companies.

We’ve seen the Afterpay Ltd (ASX: APT) share price rocket from a 52-week low of $8.01 per share to a new 52-week high of $43.68 in the space of a couple of months. I think a 445% share price increase in such a short space of time means the ship may have sailed on Afterpay for now.

However, if you’re looking for ASX tech shares that are good value today, check out one of my top picks below.

Why this ASX tech share is in the buy zone

Let’s ignore the big winners in 2020 like Afterpay and NextDC Ltd (ASX: NXT) for just a moment. While their recent gains are good news for shareholders, the rest of us may be experiencing a bit of FOMO!

That’s why I’m focusing on what could be ‘the next Afterpay’. Sitting at the top of my list is one of my favourite ASX tech shares, Xero Limited (ASX: XRO).

Xero shares haven’t crashed lower in 2020 and are actually outperforming the ASX 200 by quite a margin. Whilst the Xero share price has only edged 0.20% higher this year, it has been far less volatile than many of its ASX 200 cohorts. 

It’s true that the ASX tech share is already highly valued. However, I don’t think this means it can’t continue to grow well into the future. Xero is still continuing to sign large clients and I can see demand for its services increasing in the current climate. Businesses need to carefully manage their obligations under government stimulus programs like JobKeeper and Xero’s platform is perfect for just that.

Foolish takeaway

Xero shares have been holding their value in 2020. That’s a real plus for investors given it is a highly valued growth share. Despite the fact some believe it is currently overvalued, I like Xero’s prospects this year and think we could see a solid earnings result in August 2020. Therefore, I still like this share for adding some growth potential to a diversified portfolio.

More reading

• Afterpay share price on watch after hitting 5 million active US customers
• Is the Wesfarmers share price in the buy zone?
• 3 five-star ASX 200 shares to buy right now
• 5 things to watch on the ASX 200 on Thursday
• Save your future self from financial misery

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Afterpay Ltd (ASX: APT) share price will be on watch this morning after the release of a business update.

What did Afterpay announce?

This morning the payments company announced that there are now more than five million active customers in the United States using its buy now pay later service.

Furthermore, in total there are nearly nine million U.S. consumers who have joined the platform since its launch two years ago. This includes more than one million new customers using the platform during the COVID- 19 period of the last ten weeks.

According to the release, this represents a 30-40% increase in the weekly run rate from January and February.

In addition to this, the company revealed that more than 15,000 brands and retailers are offering, or in the process of offering Afterpay to their customers.

New merchants include A.L.C., AE/Aerie, American Eagle, Birkenstock, Furla, Herschel, Lancer Skincare, Marc Jacobs Beauty, Perricone MD, Soko Glam and The Hut Group, Tilly’s, and YSL Beauty.

This led to the Afterpay app having more than 15 million app and site visits during April, with Afterpay’s U.S. Shop Directory contributing nearly 10 million lead referrals to its retail partners.

Nick Molnar, co-founder and U.S. CEO of Afterpay, commented: “At a time in which ecommerce has become the primary way people are shopping, there is a growing interest and demand among consumers to pay for things they want and need over time using their own money – instead of turning to expensive loans with interest, fees or revolving debt.”

 “We feel so grateful to partner with the merchant community to support their shoppers and help them attract more customers, as commerce and retail starts to rebound over the next several months,” he added.

No update was provided on the ANZ or UK businesses.

More reading

• Do the Altium and Xero share prices still represent good long-term buys?
• 3 fantastic ASX shares to buy now to get rich later
• 2 millionaire-maker ASX internet growth shares
• Where to invest $500 in ASX shares right now
• This ASX fintech share is soaring again as the economy reopens

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Wesfarmers Ltd (ASX: WES) share price has fallen 5.99% lower in 2020, but is the Aussie conglomerate in the buy zone?

Why the Wesfarmers share price has slumped lower

Normally a year to date share price fall of 5.99% wouldn’t be considered a good thing. However, the S&P/ASX 200 Index (ASX: XJO) has slumped 16.62% over the same period which means the group’s shares have actually outperformed in 2020.

Investors are struggling to value many businesses in the current climate and the Wesfarmers share price is tough to evaluate at the best of times. The company has interests in a wide range of industries and sectors including retail, mining and chemicals.

Investors are clearly pricing in a potentially negative impact on earnings from COVID-19 in 2020. I think one of the hardest-hit areas of the business could be the group’s retail arm which includes brands like Kmart and Target.

However, I think the Wesfarmers share price could currently be undervalued and here are a few reasons why…

Wesfarmers has a lot of cash right now

Wesfarmers has been sitting on a big pile of cash for years. How big? The group’s FY 2019 annual report from August 2019 suggests it’s a $795 million pile. This could swell even larger in 2020 after the $1.1 billion sale of another part of its stake in Coles Group Ltd (ASX: COL).

That’s good news for shareholders and the Wesfarmers share price in the current environment. Cash is king right now and Wesfarmers has plenty. On top of that, it could be well-placed to pounce on any undervalued companies targeted for acquisition.

The conglomerate is always looking for efficiency

Despite some potential business challenges, Wesfarmers is always looking to improve efficiencies. The group recently flagged closures for underperforming Target stores and sold off its remaining coal mining interest in December 2018.

These improvements in efficiency could be good news for the Wesfarmers share price in 2020. If the business uses the current climate to continue re-aligning its strategy, earnings could be more stable than many investors expect.

More reading

• 3 five-star ASX 200 shares to buy right now
• 5 things to watch on the ASX 200 on Thursday
• Save your future self from financial misery
• ASX 200 ends the day higher, EML share price rises another 12%
• These are the latest ASX shares to be downgraded by top brokers

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Some exchange-traded funds (ETFs) offer high growth for investors despite the coronavirus.

I like how cheap some ETFs out there are such as BetaShares Australia 200 ETF (ASX: A200) and Vanguard U.S. Total Market Shares Index ETF (ASX: VTS).

The ASX does have some impressive growth companies, but they’re not the largest positions within the ASX 200. The biggest businesses in Australia are mature businesses in slow growth industries.

I think these two ETFs have high growth, with an Asian flavour:

Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE)

The Asian region is handling the coronavirus much better than some western nations right now. South Korea, Singapore and Vietnam have all done impressive things with their own tactics. China is now in a much stronger position than the US to push on from this pandemic.

Vanguard is one of the best ETF providers in the world and this ETF has a management fee of just 0.4% per annum.

Due to Asia’s growing prominence, stronger savings rate and middle class wealth effect, I like the idea of getting exposure to Asian shares.

I think this ETF has high growth because it’s invested in businesses like Alibaba, Tencent, Taiwan Semiconductor Manufacturing, Samsung and Ping An Insurance. These businesses could easily be described as the equal of their western counterparts. But the ETF is actually invested in over 1,250 businesses, not just those few names, which is great diversification.

According to Vanguard, the ETF has an earnings growth rate of 11.6%, a return on equity (ROE) of 14.76% and a price/earnings ratio of just 13.3x. I believe these are attractive statistics and show the ETF has high growth potential.  

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

Perhaps you don’t want to be invested in 1,250 Asian shares. Maybe you just want exposure to 50 of the biggest and best Asian technology and online retail shares. Well that’s exactly what this ETF offers.

If you just looked at the holdings, you’d see similar names. But this ETF has larger positions of each tech name. Alibaba is 9.7% of the portfolio, Tencent is 9.7%, Taiwan Semiconductor Manufacturing is 9.2% and Samsung is 9%.

This high growth ETF has returned an average of 14.6% per annum after fees since inception in September 2018.

Around two thirds of the ETF is invested in three sectors: ‘semiconductors’, ‘interactive media & services’ and ‘internet & direct marketing retail’. These are attractive growth areas.

BetaShares Asia Technology Tigers ETF’s management fee is a bit higher at 0.67%, but it’s still a lot cheaper than typical active fund managers.

Foolish takeaway

Asian high growth ETFs have higher risks (particularly relating to China), but they could generate higher returns. If you just want a tech-focused ETF then the BetaShares offering could be a great pick. But choosing a broad investment exposure to the whole of Asia and every industry is also a very compelling prospect.

More reading

• 3 stellar ASX growth shares to buy right now
• How I’d invest $50,000 into ETFs
• 2 ETFs for easy investing and good returns
• 3 top ASX shares to buy now and hold for 10 years
• How to build your first ASX share portfolio

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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 new additions to your portfolio, then I think the three ASX 200 shares listed below would be great options.

I believe they are amongst the best on offer on the Australian share market and could generate strong returns for investors over the next decade.

Here’s why I rate them as five-star stocks:

a2 Milk Company Ltd (ASX: A2M)

I continue to rate this infant formula and fresh milk company as a five-star stock. I’m a big fan of the company due to its strong and unique brand, its wide margins, and positive long term growth potential. Overall, I believe these have put a2 Milk Company in a position to continue growing its earnings at a solid rate for many years to come. In FY 2020 the company is expecting to deliver another stellar result. The top end of its recently upgraded guidance implies year on year revenue growth of 34.1% and EBITDA growth of 35.4%.

CSL Limited (ASX: CSL)

Another five-star stock to consider is CSL. I think the biotherapeutics giant is arguably the highest quality company that Australia has ever produced and could be a great long term investment. This is thanks to CSL’s world class operations, leading therapies, growing plasma collection network, and its potentially lucrative research and development pipeline. I believe these leave the company well-placed to continue generating strong returns for investors over the next decade and beyond.

Xero Limited (ASX: XRO)

A final five star stock to consider is Xero. I think the leading cloud-based business and accounting software provider is a fantastic long term investment option. This is thanks partly to the quality and stickiness of its product, which has consistently led to Xero’s retention rate remaining sky high. I feel this gives it a great foundation to build on. In addition to this, the company is still only scratching at the surface of its massive market opportunity. I expect further market share gains over the next decade to drive strong earnings growth and returns for investors.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Save your future self from financial misery
• ASX 200 ends the day higher, EML share price rises another 12%
• These are the latest ASX shares to be downgraded by top brokers
• $3,000 invested in these 3 ASX industries could make you a fortune in the future

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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) bounced back from a poor start to keep its winning streak alive. The benchmark index climbed 0.25% to 5,573 points.

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

ASX 200 expected to rise again

It looks set to be another positive day of trade for the ASX 200 index. According to the latest SPI futures, the benchmark index is expected to open the day 43 points or 0.8% higher. This follows a strong night on Wall Street which saw the Dow Jones jump 1.5%, the S&P 500 rise 1.7%, and the Nasdaq race 2.1% higher.

Tech shares could rise.

Australian tech shares such as Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX) could be on the rise today after their U.S. counterparts stormed higher overnight. Tech giants Facebook and Amazon climbed to record highs and helped drive the technology-focused Nasdaq index 2.1% higher.

Aristocrat Leisure half year update.

The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch when it releases its half year results. According to a note out of Goldman Sachs, it expects the gaming technology company to post a 6% increase in revenue to $2.2 billion and a 2% decline in NPATA to $416 million. The broker believes the company’s Digital segment will offset revenue weakness in the Land based segment. It has forecast Digital revenue growth of 30% to $1,067 million.

Oil prices jump.

It could be a positive day for energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL). This follows a strong night of trade for oil prices thanks to a surprise drop in U.S. stockpiles. According to Bloomberg, the WTI crude oil price is up 4.9% to US$33.53 a barrel and the Brent crude oil price has risen 3.3% to US$35.78 a barrel.

Gold price pushes higher.

Gold miners such as Newcrest Mining Limited (ASX: NCM) and St Barbara Ltd (ASX: SBM) could push higher today after a solid night of trade for the gold price. According to CNBC, the spot gold price rose 0.3% to US$1,750.50 an ounce. The precious metal was given a boost by stimulus hopes and vaccine doubts.

More reading

• 3 five-star ASX 200 shares to buy right now
• Save your future self from financial misery
• ASX 200 ends the day higher, EML share price rises another 12%
• These are the latest ASX shares to be downgraded by top brokers
• $3,000 invested in these 3 ASX industries could make you a fortune in the future

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The National Australia Bank Ltd (ASX: NAB) share price continued its positive run on Wednesday and pushed higher again.

The banking giant’s shares are now up 18% from the 52-week low they dropped to in March.

Is it too late to invest?

While NAB is not my number one pick, I still believe its shares would be great options at the current level.

Times may be hard for the bank right now, but the cycle will eventually change and a return to better days will come. I feel this could make it worth being patient and buying its shares with a long term view.

I’m not alone in labelling NAB a buy.

Who else likes NAB?

Earlier this week analysts at Goldman Sachs reiterated their conviction buy rating and $17.50 price target on the bank’s shares.

With its shares currently changing hands at $15.60, this price target implies potential upside of greater than 12% over the next 12 months excluding dividends.

But if you include the fully franked dividends of $1.05 per share Goldman Sachs expects NAB to pay in FY 2021, this potential return stretches to almost 19%.

Why does Goldman Sachs like NAB?

The broker likes NAB due to the dramatic improvement in its operational performance in recent years. This has particularly been the case with how it manages the volume versus margin trade-off.

In addition to this, it expects NAB’s revenue momentum over the medium term to remain superior to its peers. This is expected to be driven by its overweight exposure to SME lending, which Goldman Sachs views as both a relative volume and margin tailwind versus housing.

Another reason it is positive on NAB is its costs focus. This has seen NAB deliver flat expense growth in FY 2019 and FY 2020 excluding notable items.

All these positives are expected to combine and drive the strongest pre-provision operating profit (PPOP) growth among its peers. Which, considering its 15% PPOP multiple discount to peers, Goldman Sachs feels NAB is the standout pick in the sector.

More reading

• Why the Commonwealth Bank share price is the best buy among the Big 4 banks
• Are ASX bank shares worth buying despite dividend cuts?
• Is it time to buy ASX banks?
• The ASX big bank stock most likely to outperform in the COVID-19 recovery
• 5 ASX 200 dividend shares for an economic recovery

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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