Why this broker sees 20% upside in the QBE (ASX:QBE) share price

Is it time to buy this insurance giant's shares?

| More on:

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

The QBE Insurance Group Ltd (ASX: QBE) share price has been among the best performers on the ASX 200 this year.

Since the start of 2021, the insurance giant's shares have raced almost 34% higher.

two colleagues high five each other as they sit side by side at a long desk in front of their laptop computers in an office environment.

Image source: Getty Images

Has the QBE share price peaked?

The good news for anyone that missed out on its gains this year, is that one leading broker still believes the QBE share price can keep climbing.

According to a note out of Morgans, its analysts have an add rating and $13.70 price target on the company's shares.

Based on the current QBE share price of $11.43, this implies potential upside of 20% over the next 12 months.

Another bonus is that Morgans is forecasting a ~65 cents per share dividend in FY 2022. If you add this into the equation, the potential total return increases to over 25%.

Why does Morgans like QBE?

Morgans is bullish on the QBE share price due to its valuation and the company's improving performance.

In respect to the latter, the broker believes QBE's first half result was the best it has delivered in years.

It commented: "QBE Insurance Group's 1H21 NPAT (US$441m) was comfortably ahead of Factset consensus (US$316m), with the 1H21 DPS (A11cps) also above expectations (8cps). Overall, we saw this as a good result, with very strong top-line growth (+20% constant currency), It was QBE's best combined ratio in almost a decade (93.3%), and there was no real negative news."

As for its valuation, the broker believes at under 14x estimated FY 2022 earnings, the QBE share price is great value at present. Particularly given its positive outlook.

Its analysts said: "We see QBE as likely having positive underlying momentum into next year. QBE has been putting through top-line rate increases of around 9%, which should assist margin expansion into FY22. With QBE's balance sheet recently reset, pricing tailwinds evident and the stock relatively inexpensive trading on ~13.5x FY22F PE."

Overall, this could make it worth considering QBE shares this week.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Brokers name 3 ASX shares to buy right now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Person with thumbs down and a red sad face poster covering their face.
Broker Notes

6 ASX 200 shares downgraded by the experts this week

Brokers have reduced their ratings on six ASX 200 shares, including PLS Group and Westpac this week.

Read more »

Sell buy and hold on a digital screen with a man pointing at the sell square.
Broker Notes

Should you buy Wesfarmers shares amid rising profits and revenues?

A leading analyst offers his outlook for Wesfarmers shares.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Broker Notes

Buy, hold, sell: Evolution Mining, Netwealth, and Nufarm shares

What is Morgans saying about these popular shares? Let's dig deeper into things.

Read more »

Health professional looking at a laptop.
Broker Notes

Is the Telix share price heading to $19? This broker thinks it is

Bell Potter remains bullish on this name. Here's what it is saying.

Read more »

Happy man working on his laptop.
Broker Notes

Broker says this ASX 200 stock can deliver a 20% return

Bell Potter is bullish on this fintech stock. Let's see what is saying about this one.

Read more »

A man holding a cup of coffee puts his thumb up and smiles with a laptop open.
Broker Notes

ASX 200 shares with renewed buy ratings this week

Brokers have signalled ongoing confidence in Zip, ANZ, Coles, and several other ASX 200 shares.

Read more »

Comical investor reading documents and surrounded by calculators.
Broker Notes

4 ASX 200 shares newly upgraded this week

As the Iran war and fuel crisis continues, some ASX 200 shares have attracted upgrades from the experts.

Read more »