A top broker reckons this ASX retail share is a buy with a 50% upside

Could Adairs be a buy today?

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published January 6, 2022 3:00 pm AEDT

Finding ASX shares worth buying is always a hard task. Nothing is ever certain in life, and even less so in the ever-changing world of share market investing. That's why it can often be worth paying attention to what some of the ASX's top brokers and experts are saying. So today, let's check out Adairs Ltd (ASX: ADH).

Adairs is an ASX retail share that specialises in homewares, bedding and linen. The Adairs share price has had a moderately pleasing past 12 months, rising by just over 13%. In saying that, it has spent the past 6 months going backwards, falling by 3.2% since last July.

As it stands today, Adairs is currently trading at a share price of $3.92, down a nasty 3.2% so far today.

Even so, Adairs is currently being rated as a 'buy' by a couple of top ASX brokers.

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Top ASX brokers rate Adairs share price as a buy

The first is investment bank Goldman Sachs. Goldman currently rates Adairs as an ASX buy, with a 12-month share price target of $5.11. That's almost 30% above the share price of $3.92 that Adairs shares are asking today. Goldman likes Adairs' strong presence both in the physical and online retail spaces, as well as its current valuation.

But Goldman isn't the only broker rating Adairs shares as a buy right now.

As my Fool colleague James covered last week, fellow broker UBS is also bullish, even more so than Goldman. UBS currently gives Adairs shares a 12-month share price target of $5.90. That implies a potential future upside of close to 50% on today's pricing. UBS is eyeing potentially large dividend income from Adairs shares. It is expecting a full year and a fully franked dividend of 19.6 cents per share in FY2022, and 29.9 cents per share for FY23. The latter would represent a forward yield of almost 7.6% on today's share price.

No doubt investors will be crossing their fingers that these broker opinions become fact over the next year or so.

At the current Adairs share price, this ASX retailer has a market capitalisation of $692.1 million, with a price-to-earnings (P/E) ratio of 10.99 and a dividend yield of 5.84%.

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