Top broker says QBE (ASX:QBE) share price is a buy

This leading broker remains bullish on QBE…
The post Top broker says QBE (ASX:QBE) share price is a buy appeared first on The Motley Fool Australia. –

The QBE Insurance Group Ltd (ASX: QBE) share price has been among the best performers on the ASX 200 in 2021.

Since the start of the year, the insurance giant’s shares have risen just over 40%.

Can the QBE share price keep on rising?

The good news for shareholders is that one leading broker still believes the QBE share price can keep rising from here.

According to a recent note out of Goldman Sachs, its analysts have a conviction buy rating and $13.41 price target on its shares.

Based on the current QBE share price of $12.05, this implies potential upside of 11% over the next 12 months before dividends.

Furthermore, Goldman is forecasting partially franked dividends per share of 37 cents in FY 2021 and then 58 cents in FY 2022. This represents yields of 3.1% and 4.8%, respectively, over the two financial years.

What did the broker say?

Goldman was very pleased with QBE’s performance during the first half of FY 2021 and notes that it delivered a result ahead of its expectations.

It commented: “QBE’s 1H21 cash NPAT of US$467mn was 41% ahead of our US$330mn estimate. DPS of A11c was however below our A19c estimate (interim payout ratio of 27%) while the balance sheet remains in good shape, with the PCA ratio at 1.73x (GSe 1.70x) and gearing at 31.1%.”

Overall, the broker believes its headline earnings are now representing underlying momentum. As a result, its analysts have upgraded their earnings estimates for the coming years.

It explained: “On balance, we upgrade our FY21-FY23 cash EPS by +13%/+5%/+3%, largely a function of reduced COVID costs and 1H releases in FY21, though stronger growth and margin in FY22/FY23.”

“We note QBE formally flagged an intention to increase growth asset exposure in its investment portfolio over the medium term. With excess capital seemingly earmarked for growth currently, we have not yet modelled any re-weighting, though note a shift from the current 7% growth asset mix to the 15% ceiling at current FUM (and a 50bps running yield) would equate to a normalised annualised NPAT uplift of c.US$100m,” it added.

All in all, the QBE share price may be smashing the market this year, but this leading broker believes it could continue doing so over the next 12 months.

The post Top broker says QBE (ASX:QBE) share price is a buy appeared first on The Motley Fool Australia.

Should you invest $1,000 in QBE right now?

Before you consider QBE, 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 QBE 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

More reading

10 ASX shares we’re overweight in right now: fund

Leading brokers name 3 ASX shares to buy today

ASX 200 Weekly Wrap: New records just keep coming for the ASX 200

3 of the best ASX results from week two of reporting season

These were the best performing ASX 200 shares last week

Motley Fool contributor James Mickleboro 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.

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