Goldman Sachs gives its verdict on the IAG share price

Is this an insurance share to buy right now?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Insurance Australia Group Ltd (ASX: IAG) share price has been a strong performer over the last 12 months.

Since this time in 2022, as you can see below, the insurance giant's shares have risen over 18%.

Can the IAG share price keep climbing?

Unfortunately, one leading broker believes the IAG share price could be close to reaching its peak.

According to a note out of Goldman Sachs, its analysts have initiated coverage on the insurer with a neutral rating and $5.29 price target.

Based on its current share price of $5.06, this suggests potential upside of just 4.5%.

And while Goldman is expecting an attractive partially franked 4.7% dividend yield in FY 2023, stretching the total potential return beyond 9%, it isn't enough for a more positive recommendation. Particularly when other insurance shares offer greater potential returns.

What did the broker say?

Goldman has outlined a number of reasons why its analysts prefer Suncorp Group Ltd (ASX: SUN) over IAG at present. It said:

We note that IAG and SUN are currently facing similar trends from an earnings perspective however we have a slight preference for SUN on valuation. SUN also has higher upside to our PT. We also note that SUN has possible catalysts on the horizon with the proposed sale of the bank/capital management as well as a possible reinsurance QS arrangement which could be supportive to margins. IAG's QS renewal on materially consistent financial outcomes bodes favourably for SUN in this regard.

The broker has initiated coverage on Suncorp with a buy rating and $13.88 price target.

Though, it is worth noting that Goldman's top pick in the insurance sector is QBE Insurance Group Ltd (ASX: QBE). There are seven reasons why this is the case, and you can read about them here.

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 positions in and has recommended Insurance Australia Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Broker Notes

A happy team of businesspeople stand in a corporate office.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

Business man marking buy on board and underlining it.
Broker Notes

10 ASX shares given buy ratings this week

Let's see which shares brokers are tipping as buys for Aussie investors this week.

Read more »

Excited couple celebrating success while looking at smartphone.
Broker Notes

5 ASX shares set to soar 40% to 80% in 12 months: experts

Experts say these ASX stocks across the mining, retail, and agriculture segments have excellent growth prospects.

Read more »

WOW! written in white on a yellow background.
Broker Notes

4 ASX 200 shares tipped to rise 30% or more in the year ahead

The experts are optimistic on these stocks.

Read more »

A woman in a red dress holding up a red graph.
Broker Notes

Macquarie names 3 ASX 200 stocks to buy right now

These companies are worth a second look.

Read more »

A white and black clock face is shown with Time to Buy written.
Broker Notes

9 ASX 200 shares with renewed buy ratings this week

Brokers retained a positive view on Judo, ANZ, Flight Centre, Santos, and other stocks this week.

Read more »

Young businessman lost in depression on stairs.
Broker Notes

5 ASX 200 shares downgraded by brokers this week

Brokers reduced their ratings on AGL, Origin Energy, Brambles, and other shares this week.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Brokers name 3 ASX shares to buy right now

Let's find out which shares top brokers are feeling bullish about this week.

Read more »