Insights

2 ASX shares rated as strong buys by brokers

IDP Education and Australian Finance Group are both highly rated.
The post 2 ASX shares rated as strong buys by brokers appeared first on The Motley Fool Australia. –

There are some ASX shares that multiple brokers like right now.

If many brokers simultaneously like a business at the current price, then that may suggest there is an opportunity there. Though there’s a risk that they could all be wrong at the same time.

With that in mind, here are two ASX shares that are well-liked by multiple brokers:

Australian Finance Group Ltd (ASX: AFG)

AFG is currently rated as a buy by at least three brokers. One of those brokers is Morgans, which has a price target of $3.30 – that suggests a potential upside of around 25% over the next 12 months if Morgans ends up being right.

The company is one of the largest mortgage broking businesses in the country.

AFG’s FY21 half-year result showed how much demand there is for property loans. Indeed, the company noted that in response to an extraordinarily strong appetite for Australian housing buoyed by government incentives to support the economy, the sector had shown its resilience and AFG had demonstrated growth across the country.

HY21 saw residential settlements rise by 24% to $20.92 billion. There was year on year growth in residential settlements in each month of the first half of FY21, with strong growth in each state. The residential trail book increased by 5% to $160 billion.

This also led to a large double increase of net profit and cashflow for the ASX share. AFG’s net profit after tax (NPAT) increased 36% to $25 million and underlying (cash) profit increased 41% to $25 million as well.

The profit growth allowed the AFG board to declare an interim dividend of 5.9 cents per share.

AFG CEO David Bailey said at the time of HY21:

We head in the second half of the 2021 financial year, with a strong balance sheet, no debt, a solid pipeline of lodgements and a good cashflow. We are well equipped to continue to deliver value to our brokers, choice to customers, competition to the lending market, and returns for shareholders.

Morgans believes that AFG has good growth potential in the current environment and it has expectations of a higher net interest margin (NIM).

Idp Education Ltd (ASX: IEL)

The education and English language testing business is currently rated as a buy by five brokers. One of the brokers that likes IDP Education is Morgan Stanley.

The broker believes that things are looking better for the short-term for the business. It thinks that a recovery is on track for the coming months and Morgan Stanley also believes that its market share is expected to increase. But the closed Australian border remains a large potential detractor, as it is an important earnings contributor.

Morgan Stanley has a price target of $33 on the business, which suggests a possible increase of the share price of around 10% over the next 12 months.

The ASX share recently announced that it had entered into a binding agreement to buy 100% of the British Council’s Indian IELTS operations (BC IELTS India) for £130 million on a debt free, cash free basis.

The company explained that IDP and the British Council currently both administer IELTS tests in India operating parallel pan-Indian distribution networks. The transaction will bring BC IELTS India operations under IDP ownership, establishing a single network. Management said this foundation for IELTS will allow it to build on its leadership position in India. It will be the sole distributor of IELTS in the Indian market.

India is the largest IELTS market by volume and has exhibited one of the highest country growth rates in recent years, according to the company.

The post 2 ASX shares rated as strong buys by brokers appeared first on The Motley Fool Australia.

Should you invest $1,000 in IDP Education right now?

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Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and IDP Education wasn’t one of them.

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More reading

Brokers name 3 ASX shares to buy today

2 highly-rated ASX growth shares tipped as buys

Broker warns that small lenders are set to beat ASX bank shares

3 stellar ASX 200 growth shares that could be buys in July

IDP Education (ASX:IEL) share price higher on bullish broker note

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. owns shares of and has recommended Idp Education Pty Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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