The Macquarie Group Ltd (ASX: MQG) share price is looking attractive at the moment, despite its strong run up in recent months.
Over the last six months, Macquarie shares have risen by 25% over the last six months. But there could be more to come as the business benefits from the recovery.
Macquarie is one of the most global ASX blue chips at the moment, with around two thirds of its earnings coming from international sources.
These are a few reasons why Macquarie could be one to watch:
Stronger near-term profit outlook
One of the most important ways to judge a business is by its profit-making potential and profit actual results.
Macquarie has had a volatile last 12 months, but it's now reporting that the profit is getting stronger
Despite giving the market profit guidance on 9 February 2021 saying that the FY21 result was likely to be slightly down, Macquarie came back to the market a few weeks later to say that it was now expecting net profit after tax for FY21 to be up 5% to 10% compared to the last financial year.
Macquarie explained that extreme winter weather in North America had significantly increased short-term client demand for Macquarie's capabilities in maintaining critical physical supply across the commodity complex and particularly in relation to gas and power.
The global investment bank's commodities and global markets (CGM) business physically ships gas on the majority of major pipelines across the US and over time has built capacity to support clients by delivering power and physical commodities to help them meet the unexpected needs of their customers.
Recovering global economy
A year ago things were looking pretty bleak for the global economy as the COVID-19 pandemic ravaged the world and caused massive market volatility and dislocation.
As a global investment bank, Macquarie needs a decent operating environment to generate profit growth. Macquarie is seeing improving trading conditions in certain areas, though it did admit that market conditions are likely to remain challenging.
The ASX share was confident enough to pursue the acquisition of NYSE-listed Waddell & Reed Financial a few months ago, which had US$68 billion of assets under management (AUM) at the time of the announcement.
This acquisition is expected to push Macquarie Asset Management's AUM over A$650 billion, making it one of the 25 largest actively managed, long-term, open-ended US mutual fund managers by AUM.
The deal will add scale and diversification to the business.
Diversified earnings
Macquarie has the ability to invest and grow anywhere in the world that it wants to.
It's generating profit from right across the world and it can put further resources into segments like green energy, infrastructure or any other trend that it sees as a long-term opportunity.
The business has changed a lot since the GFC and it's now a much more stable, reliable business. The 'annuity-style' businesses provide a particularly defensive amount of annual earnings for the business.
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What's the Macquarie share price valuation?
According to Commsec, Macquarie shares are priced at 19x FY22's estimated earnings.
It has a forecast partially franked dividend yield of 3.6% for FY22.
