2 leading ASX 20 shares rated as buys

Goodman is one of the ASX 20 shares rated as buys.

| More on:
A seasaw-style scale in balance with two sandbags either end one labelled Risk and one labelled Reward

Image source: Getty Images

Some of the S&P/ASX 20 Index (ASX: XTL) shares are rated as buys by leading analysts and they may be able to produce returns.

Businesses in the ASX 20 are some of the largest in the country. Some of those companies include ones like Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP).

But analysts really like these ASX shares from the ASX 20:

Goodman Group (ASX: GMG)

Goodman Group is a property business with operations throughout Australia, New Zealand, Asia, Europe, the United Kingdom, North America and Brazil. It’s the largest industrial property group on the ASX and one of the world’s largest listed specialist investment managers of industrial property and business globally. Goodman has an integrated strategy of owning, developing and managing property.

It’s currently rated as a buy by the broker Morgan Stanley with a price target of $23.

Goodman is a very large business. At 31 March 2021, it had $52.9 billion of total assets under management. It experienced 3.3% like for like net property income (NPI) growth in managed partnerships. The occupancy rate across the partnerships was 98%.

The ASX 20 share is working on a pipeline of big projects. At 31 March 2021, it had $9.6 billion of development work in progress.

The property business is expected to changing client and customer demand. It says:

Changing consumption trends across the physical and digital spaces are fundamentally impacting demand. In response, Goodman is developing new space particularly through multi-storey and higher intensity buildings within our urban locations.

Goodman is expecting to generate double digit operating profit growth in FY21. Operating profit is expected to be $1.2 billion, representing earnings per share (EPS) growth of 12% on FY20.  

Xero Limited (ASX: XRO)

Xero is one of the world’s largest software accounting businesses. Its offering is through the cloud, which means that users have great flexibility in how and where they access their numbers and business. The ASX 20 share also has numerous efficient and useful automated tools to save time for accountants and business owners.

It’s currently rated as a buy by Morgan Stanley.

The ASX 20 share has been growing at a fast pace for a number of years. It has grown beyond Australia and New Zealand. Xero now has a global subscriber base of more than 2.7 million. The UK is a particularly large revenue base for Xero, with more than 720,000 subscribers. North America has more than 285,000 subscribers. There are more than 175,000 subscribers across the rest of the world, in places such as South Africa and Singapore.

Xero has a very high gross profit margin of 86%. That means that 86% of new revenue can fall to the next profit line.

The company is seeing the benefits of long-term subscribers who love its services and productivity. In FY21, Xero’s 20% subscriber growth contributed to a 17% increase in annualised monthly recurring revenue (AMRR) to $963.6 million. Xero explained that growing awareness among small businesses of the benefit of digital tools and cloud technologies contributed to lower churn and a 38% increase in total lifetime value to $7.65 billion.

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

Before you consider Xero, 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 Xero 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

Motley Fool contributor 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 and has recommended Xero. The Motley Fool Australia owns shares of and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Blue Chip Shares