Insights

2 ASX shares rated as strong buys by brokers

EML Payments is one of the ASX shares that’s well liked right now.
The post 2 ASX shares rated as strong buys by brokers appeared first on The Motley Fool Australia. –

There are a group of ASX shares that many brokers like at the same time.

Brokers are constantly scouring the share market for potential investments that they believe are opportunities. If multiple brokers like a business simultaneously then that may suggest that it’s an opportunity. Or they may all be wrong at the same time.

At the moment, these two ASX shares are strongly liked by multiple brokers:

EML Payments Ltd (ASX: EML)

EML Payments is currently rated as a buy by at least three brokers, including UBS.

The broker currently has a price target of $4.80 on EML Payments, which suggest the EML share price could increase by around 25% over the next 12 months, if the broker is right.

The payments business recently reported its FY21 result. It revealed that gross debit volume (GDV) increased 42% to $19.7 billion, driving revenue up 60% to $194.2 million.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 65% to $53.5 million. Underlying net profit (NPATA) increased 54% to $32.4 million and operating cashflow rose 121% to $48.8 million.

The segment that experienced the lion’s share of the growth was general purpose reloadable (GPR), which saw revenue increase from $41.9 million to $113.5 million. Part of this growth was the PFS business contributing for a full 12 months, but the existing EML business also generated 34% of growth.

In FY22, the ASX share is expecting to generate underlying EBITDA in a range of between $58 million to $65 million.

Regarding the Central Bank of Ireland’s (CBI) regulatory action, EML said it has provided CBI with a detailed remediation plan addressing the raised concerns. This plan is expected to be substantively complete by the end of the 2021 calendar year, with remaining items finished by the end of the March 2022.

UBS said that the CBI action is an important positive when looking at what the market was expecting, and it seems EML is likely to keep its licence.

According to UBS, the EML share price is valued at 30x FY23’s estimated earnings.

Seven West Media Ltd (ASX: SWM)

Seven West is currently rated as a buy by at least four brokers, including analysts at Macquarie Group Ltd (ASX: MQG). The broker has a price target on the media business of $0.77. That implies the Seven West share price could increase by 75% over the next 12 months, if the broker is right.

Macquarie is positive on Seven West Media’s shorter-term prospects, though it also noted the increase of costs which are predominately from the Ashes and the Olympics.

Seven West reported that the metropolitan free to air TV advertising market rebounded strongly, up 25.8% in the second half of FY21 and up 11.5% for the whole of FY21.

Seven’s digital revenue increased by 78% year on year, with video on demand market growth of 55%.

There was a large increase in revenue from the ASX share, but operating expenses also declined by 7.5% to $1.02 billion (which excludes depreciation and amortisation). The ASX share’s underlying earnings before interest and tax (EBIT) soared 141% year on year to $229 million, whilst net debt reduced 40% to $240 million.

It made a statutory profit after tax of $318.1 million, up from a loss of $201.2 million in FY20.

The broker thinks that Seven West is valued at just 4x FY23’s estimated earnings.

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

Should you invest $1,000 in EML Payments right now?

Before you consider EML Payments, you’ll want to hear this.

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

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*Returns as of August 16th 2021

More reading

EML (ASX:EML) share price plunges 8% after reporting record results
When was the worst ever day on the EML (ASX:EML) share price chart?
Seven West Media (ASX:SWM) share price falls 5% on FY21 earnings
Why the EML (ASX:EML) share price is gaining today
What’s going on with the EML Payments (ASX:EML) share price?

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 EML Payments. The Motley Fool Australia owns shares of and has recommended EML Payments and Macquarie Group Limited. 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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