Broker sees 42% upside for the Accent (ASX:AX1) share price

Is Accent a bargain buy?

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The Accent Group Ltd (ASX: AX1) share price is under pressure again on Thursday.

In afternoon trade, the footwear retailer’s shares are down 4% to a 52-week low of $1.94.

This means the Accent share price is now down 21% since the start of 2022.

Is the Accent share price a bargain buy?

While the recent weakness in the Accent share price is very disappointing, one leading broker appears to believe that it has created a buying opportunity for investors.

According to a note out of Bell Potter, in response to the company’s recent trading update, its analysts have retained their buy rating but trimmed their price target on its shares to $2.75.

Based on the current Accent share price, this implies potential upside of 42% for investors over the next 12 months. And that doesn’t include dividends. Bell Potter expects a 3% dividend yield from its shares at current levels, stretching the total potential return to 45%.

What did the broker say?

Bell Potter notes that Accent has guided to earnings before interest and tax (EBIT) of $30 million to $31 million during the first half. This fell short of its estimate of $34 million due to a significant slowdown in sales due to the spread of the Omicron variant.

This has unsurprisingly led to the broker making some major revisions to its earnings and dividend estimates for the remainder of the financial year.

Nevertheless, its analysts believe this is a short term headwind and remain positive on its long term outlook. Furthermore, the broker feels the Accent share price is trading at a very attractive level despite its earnings revisions.

It concluded: “Notwithstanding COVID impacts on recent trading, we believe AX1’s core business remains strong with all growth levers intact. Valuation also remains undemanding with FY23/FY24 PE of 14.6x/12.1x. Accordingly, we retain our Buy rating on the stock.”

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

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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 recommended Accent Group. 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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