One ASX stock is selling at a discount right now, even though it represents a quality business poised for "superior earnings growth" in the medium term.
That's the view of Wilsons head of investment strategy David Cassidy, who said Macquarie Group Ltd (ASX: MQG) is a "quality cyclical".
"Quality cyclicals do not have the same persistent growth characteristics as pure structural growth stocks," he said in a Wilsons memo.
"However, quality cyclicals usually have a structural growth story embedded within the company."
Immediate growth might be hampered for Macquarie as the economy slows down, but in the longer term "the structural growth drivers should outweigh the cyclicality".
How did Macquarie perform in the 2022 financial year?
In a period that's seen plenty of bruising among ASX shares, Macquarie fared respectably, gaining 5% for the 2022 financial year.
At its peak in November 2021, it even became one of the big four banks.
This is all while giving out a handy dividend yield of 3.66%.
While it has made its name over the decades as an investment bank, its small retail arm is fast gaining traction in the competitive Australian market.
Its home loan book has been growing rapidly over the last three years.
"We have been impressed by the growth rate of Macquarie's lending business," said Cassidy.
"If it continues to grow at its current pace, it is very possible that the banking segment could capture over 10% of Australia's household lending by the end of the decade."
To grow the deposit side of the retail market, last month Macquarie even started offering transaction accounts that pay out a no-questions-asked 1.5% per annum interest rate.
This year's plunge just makes it a bargain
Like many ASX shares, Macquarie investors have been forced to take a haircut in 2022.
For the year-to-date, the stock price is down almost 20%.
But Cassidy reckons that this merely presents a "good opportunity to buy a quality cyclical at a reasonable price".
The bank's early investment in industries that drive decarbonisation gives it excellent upside, he feels.
"Macquarie and Brookfield… have the first mover advantage in green energy," said Cassidy.
"Macquarie is well-positioned to take advantage of this opportunity and is one of the few ASX stocks exposed to this macrotrend."
And despite the share price doubling over the past five years, this year's sell-off now has the stock on undemanding ratios.
"Macquarie currently trades on a PE multiple of 15x (1-year forward earnings) — lower than it has been trading on post 2020 and close to its 5-year historical average," said Cassidy.
"We think this valuation looks reasonable due to the strong long-term earnings growth potential for Macquarie and unique leverage to the energy transition."
