2 compelling ASX shares rated as buys by brokers

The 2 ASX shares in this article, including Goodman (ASX:GMG) have been rated as buys by brokers and they look like compelling stocks to own.

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There are a number of compelling ASX shares that multiple brokers have rated as a buy and they could be worth following.

If more than one broker thinks that a business is a buy then that suggests there could be an opportunity. A single broker might be wrong. Though, of course, they could be all wrong at the same time.

With that in mind, these are two that are highly rated:

Lovisa Holdings Ltd (ASX: LOV)

Lovisa is rated as a buy by at least three brokers including Macquarie Group Ltd (ASX: MQG). The price target for Lovisa is $15.50.

The broker thinks that Lovisa is a quality business and is a reopening trade idea. The recent FY21 half-year result was better than the broker was expecting. The Lovisa share price jumped after the half year result release.

Lovisa reported that revenue declined 9.8% to $146.9 million. Gross profit dropped 11.7% to $113.4 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 15.2% to $39.6 million and underlying net profit after tax (NPAT) fell 22.6% to $21.5 million.

Comparable store sales were positive in the second quarter of FY21, but down 4.5% for the half. Despite all of the COVID-19 impacts, 25 net new stores were opened by the ASX share during the half year.

Digital sales are a small part of the business, but it’s generating strong growth with a rise of 335% for the half year period.

The Beeline acquisition is an important part of medium-term growth. It’s expecting to convert and open for trade around 90 stores. It will be immediately cashflow positive and gives the business a base to accelerate its growth in Europe, taking the store network to over 150 stores.

In the first seven weeks of the second half of FY21 it saw comparable store sales growth of 12%.

Goodman Group (ASX: GMG)

Goodman is another ASX share that’s rated as a buy by at least six brokers. One of those brokers that likes the real estate business is Citi, which has a price target of $21.

Citi likes that Goodman is benefiting from the industrial property theme. COVID-19 has been a multiplier for this effect. Lower interest rates have also helped the Goodman net tangible asset (NTA) value as well as its assets under management (AUM).

Goodman has noted that the logistics and warehousing sector are playing a significant role globally in providing essential infrastructure to the digital economy. It’s expecting more demand from customers as they meet higher customer requirements and higher utilisation of properties.

In the FY21 half-year result, the global real estate ASX share saw operating earnings per share (EPS) rise by 15% to 33.1 cents. The NTA rose 3.3% over six months to $6.03, total AUM grew 5% to $51.8 billion and external AUM rose 6% to $48.5 billion.

Goodman’s rental property portfolio remains strong. Occupancy was 97.9% and like for like net property income (NPI) rose by 3%. It is currently leasing 1.9 million sqm equating to $269 million of annual rental property income across the group and partnerships.

The pipeline of projects remains strong, with a development work in progress (WIP) of $8.4 billion across 56 projects in 12 countries. The yield on cost for these projects is 6.6%.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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.

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