Is it time to pounce on Primary Health Care Limited, Suncorp Group Ltd, and Mortgage Choice Limited?

Trading at their lowest point all year, should you buy Primary Health Care Limited (ASX:PRY), Suncorp Group Ltd (ASX:SUN), and Mortgage Choice Limited (ASX:MOC)?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite the volatility in Australia's major market indices recently, relatively few companies have hit new lows this week.

Of the three featured in today's article, weakening confidence in the housing boom looks to have hurt the bank and the mortgage broker, while worsening sentiment has also impacted the pathology and hospital operator.

Is weak sentiment creating a buying opportunity, or are lower prices really justified?

Primary Health Care Limited (ASX: PRY) – last traded at $3.73, down 13% for the year

When I wrote 4 reasons Primary Health is no bargain on Monday, I argued that its high and rising debt combined with negative free cash flow (this means the company must take on more debt to cover its spending) were a major negative, as was the Productivity Commission's healthcare review which could hurt pathology revenues in the near term.

While the company is quite cheap at face value – trading on a Price to Earnings (P/E) ratio of 12 – compared to similar companies like Sonic Healthcare Limited (ASX: SHL) (which has a P/E of 21), I do not feel it is a bargain.

Investors should be aware of the risks, however, given its coveted status as a healthcare business I do not believe Primary will fall substantially further in the absence of any bad news.

Suncorp Group Ltd (ASX: SUN) – last traded at $12.43, down 13% for the year

Despite a positive annual report, the market has become bearish on Suncorp in recent times with the stock now trading at its lowest point in 18 months.

However, the bank/insurer has a strong balance sheet and shareholders stand to benefit from restructuring (giving cost savings) as well as a cracking 6.8%, fully-franked dividend which appears sustainable.

There is some uncertainty regarding bank profits and bad debts in future years which has led to Suncorp's falling share price. With that said, insurance is Suncorp's biggest money-spinner and investors looking for a reliable dividend could do a lot worse.

In the near term I do not expect Suncorp to fall significantly further.

Mortgage Choice Limited (ASX: MOC) – last traded at $1.80, down 34% for the year

The pressures behind the drop in Mortgage Choice's share price are fairly obvious, with a number of market participants increasingly betting that the company will struggle to perform in future years, or if the housing boom slows.

Revenue and profit growth was very limited over the past 12 months and management's acknowledgement that Mortgage Choice lost market share will have hurt the share price.

Importantly, while investors are nervous about the housing market going forwards, it is important to note that mortgage brokers account for 52% of all loans originated and that figure is growing each year.

It is difficult to evaluate where Mortgage Choice shares are headed next, however, given the uncertainty around the housing market at present I would not buy at today's prices – despite the whopping 8.6% dividend.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. 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 Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »