Woodside Petroleum is one of the ASX shares rated as a buy.
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Brokers are constantly on the lookout for ASX share opportunities that may be good value.
Share prices and profit expectations are regularly changing as the months go by. So, sometimes a business can quickly change from being bad value to good value, or vice versa.
A company’s share price can rise and that business could be called cheap. Or, it could fall and actually be expensive.
When multiple brokers believe that a business is good value then that may suggest the ASX share is an opportunity. However, all of those brokers could be wrong at the same time.
With that in mind, here are two ideas that are well liked at the moment:
South32 Ltd (ASX: S32)
South32 is a diversified resources business that’s involved in a number of resources included alumina, aluminium, bauxite, metallurgical coal, lead, nickel, manganese, silver and zinc.
This ASX miner is currently rated as a buy by at least six brokers including Morgan Stanley. The broker has a price target of $4.20 on the business, which suggests that South32’s share price could rise by more than 20% over the next 12 months if the broker is right.
Using the broker’s profit projections, South32 shares are valued at just 6x FY22’s estimated earnings with a forward grossed-up dividend yield of 11%.
South32 is benefiting from high prices and high demand for many of its commodities.
In FY21, the ASX share saw underlying earnings rise by 153% to US$489 million, with underlying earnings per share (EPS) rising by 164% to US 10.3 cents.
This high level of profit growth allowed South32 to increase its ordinary dividend by 133% to US 4.9 cents per share and the board also declared a special dividend of 2 cents per share.
However, Morgan Stanley is expecting the dividend to be reduced in FY23 as profit reduces back down. The FY23 grossed-up dividend yield is expected to be around 8%.
Woodside Petroleum Limited (ASX: WPL)
Woodside is a large oil and gas ASX share.
It’s currently rated as a buy by at least four brokers, including UBS. The rising oil price and stronger expectations are feeding into a rosier shorter-term outlook for the business.
For FY22, the broker is expecting Woodside to pay a grossed-up dividend yield of 12.5%. UBS puts the current Woodside share price at 14x FY22’s estimated earnings.
Management said that the combination of Woodside and BHP’s oil and gas business is expected to deliver substantial value creation for both sets of shareholders from across a range of areas.
One of the main benefits is the greater scale and diversity of geographies, products and end markets through an “attractive” and long-life conventional portfolio.
Another attraction is the estimated synergies of more than US$400 million per year, from optimising corporate processes and systems, leveraging combined capabilities and improving capital efficiency on future growth projects and exploration.
In the first half of FY21, the ASX share saw underlying net profit after tax rise 17% to $354 million, whilst free cashflow grew 18% to $311 million. Reported net profit after tax jumped 108% to $317 million.
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Should you invest $1,000 in Woodside right now?
Before you consider Woodside, 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 Woodside wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
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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 Bruce Jackson.