Buy this ASX share with 48% upside: expert

After the recent sell-off, how do you know which are the bargains to pick up and which stocks are just duds? Here’s one suggestion.

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With the S&P/ASX 200 Index (ASX: XJO) falling more than 8% so far this year, there certainly are plenty of discounted stocks out there.

But the trouble is, how do you know which ones are true bargains and which ones will languish?

Taking note of the “buy” conviction of a professional investor is one way to figure it out.

Morgans investment advisor Jabin Hallihan this week picked out one ASX share that he reckons could rise more than 48%, which he definitely rates as a buy.

‘Strong earnings growth’ with a PE ratio below 10

Silk Logistics Holdings Ltd (ASX: SLH) provides port-to-door logistics services for clients in many different industries.

The company only listed on the ASX back in July and has seen its share price tumble in recent weeks as a part of the general market sell-off.

The stock started Tuesday at $2.15.

“We buy Silk Logistics for exposure to the growing container logistics market in Australia,” Hallihan told The Bull

“The company offers strong earnings growth and is trading on an attractive price/earnings multiple below 10 times.”

Hallihan’s team has calculated the fair value for Silk Logistics is $3.19 per share, which is 48.4% above the current level.

He added that last week’s $10.5 million acquisition of smaller rival 101Warehousing could be a nice catalyst.

“The acquisition multiple looks attractive, and the purchase is funded mostly from issuing shares, so the balance sheet isn’t put under undue pressure.”

While analyst coverage for the $160 million company is sparse, Shaw & Partners also agrees with Morgans that Silk is a “strong buy”.

Silk Logistics is due to report its financials on 24 February.

“We target 1H22 EBITDA and NPAT growth of c.11% and 59%, respectively,” noted Morgans’ reporting season calendar.

“However, a looming uncertainty is the labour and container logistics supply chain constraints likely to have impacted the business in late 1H22/early 2H22.”

Motley Fool contributor Tony Yoo 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.

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