There are some S&P/ASX 200 Index (ASX: XJO) shares that are leaders in Australia, or even in multiple countries. But are they buys at the moment?
Businesses that are leaders usually have strong competitive advantages that helped get them to the top and also are keeping them there.
However, business strength is one thing. Analysts also like to evaluate whether a share price is good value at the time before calling something a buy.
Let's have a look at these two leading ASX 200 share:
JB Hi-Fi Limited (ASX: JBH)
JB Hi-Fi is one of the leading retailers of electronics and home appliances in Australia (and New Zealand) with its three operating brands – JB Hi-Fi Australia, JB Hi-Fi New Zealand and The Good Guys.
The broker Ord Minnett recently decided to upgrade its thoughts on JB Hi-Fi from a hold to a buy, with a price target of $54 – that's more than 10% higher than where it is today.
Ord Minnett thinks households are going to keep buying products from JB Hi-Fi at levels elevated compared to pre-COVID. It also thinks that people will continue spending on items on their homes, whilst the return on spending on travel remains slow. Retail can continue to benefit from indirect pandemic impacts.
According to the broker, the JB Hi-Fi share price is valued at 13x FY22's estimated earnings with a projected grossed-up dividend yield of 7.6% from the ASX 200 share.
In the first quarter of FY22, JB Hi-Fi Australia sales were only down 7.5% on FY21, but up 17.3% on FY20. The Good Guys sales were down 5.6% on FY21 but up 23.6% on FY20.
Xero Limited (ASX: XRO)
Xero is a leading global cloud accounting business for small and medium businesses. It has a notable presence in a number of countries including New Zealand, Australia, the UK, the USA, South Africa and Singapore.
Opinions are mixed on the ASX tech share.
The brokers at Citi currently rate it as a buy, with a price target of $160. That's more than 10% higher than where it is today. However, the broker is keeping an eye on the UK competitor Sage which is focusing more on the smaller accounting software segment.
However, UBS has a much lower price target of $88 on the ASX 200 share, calling it a sell. That's around 40% lower than where it is today. Whilst the broker sees the continuing growth of subscribers and its annualised recurring revenue (ARR), the Xero share price is too high for the broker to be interested.
The FY22 half-year result showed total subscriber growth of 23% to 3 million, whilst annualised monthly recurring revenue (AMRR) went up 29% to NZ$1.13 billion. Looking at some individual markets, Australia added 124,000 net subscribers, to finish with 1.24 million subscribers and the UK added 65,000 net subscribers to end with 785,000 subscribers.
