Brokers rate these 2 top ASX shares as buys

Leading brokers have named 2 ASX shares that are rated as buys, one of them is the mortgage broker stock Australian Finance Group (ASX:AFG).

| More on:
steps to picking asx shares represented by four lightbulbs drawn on chalk board

Image source: Getty Images

Brokers are always keeping their eyes on what ASX shares look like they could be good value and worth pouncing on.

Share prices change every day and the value on offer is steadily shifting. Hopefully investors can jump on opportunities that look good.

The below businesses are ideas that appear to have good long-term potential whilst also looking like they’re trading at attractive value today:

Australian Finance Group Ltd (ASX: AFG)

Australian Finance Group is the biggest mortgage broking business in Australia. It’s currently rated as a buy by at least three brokers.

In the first half of FY21, the company saw high levels of growth. Residential settlements went up 24% to $20.9 billion, the securities loan book increased 18% to $2.96 billion and the residential trail loan book went up 5% to $160 billion.

This translated into strong financial numbers, with revenue rising 11% to $371 million, gross profit growing 16% to $50 million, statutory net profit going up 36% to $25 million, underlying profit going up 41% to $24.9 million and operating cashflow rising 53% to $25.8 million.

AFG said that government stimulus supported increases in first home buyers as well as upgraders and refinance activity.

The broker Macquarie Group Ltd (ASX: MQG) has a positive outlook on AFG, with a price target of $3.06.

The ASX share’s management are also positive about the future, saying that the business is well capitalised with a strong balance sheet, no debt and strong brand. The business model includes annuity style trail revenue from the existing trail book.

On Macquarie’s estimates, the AFG share price is valued at 16x FY21’s estimated earnings.

Idp Education Ltd (ASX: IEL)

IDP Education is currently rated as a buy by at least five brokers.

The business helps international students study overseas and it’s also heavily involved in English language testing.

IDP has been impacted by the COVID-19 pandemic with the closure of international borders and changes to learning. The company has managed to somewhat compensate with online learning and testing for students.

Morgan Stanley is one of the brokers that rates IDP Education as a buy, with a price target of $30. That suggests potential upside over the next 12 months of more than 20%.

IDP Education said in its half-year result that its English language testing had rebounded to pre-pandemic levels. It also had $293 million of cash to see it through the crisis.

However, despite those positive signs, total revenue still declined 26% to $269.1 million, earnings before interest and tax (EBIT) fell 43% to $47.3 million and net profit after tax (NPAT) dropped 45% to $29.7 million.

Management said that it was encouraging to see a recovery was already underway when comparing the FY20 second half and FY21 first half results.

The ownership of the ASX share is changing, but this shouldn’t lead to any material change in the operations of the business.

Andrew Barkla, IDP CEO and managing director, said:

With our global teams in place, a supported pipeline of students, and increased digital capabilities, we are beginning to capture the demand as our customers reignite their global travel and study ambitions.

According to Morgan Stanley, the IDP share price is valued at 122x FY21’s estimated earnings and 59x FY22’s estimated earnings.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

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 Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes