The Macquarie Group Ltd (ASX: MQG) share price is down over 13% since 7 March 2023. After such a quick fall in less than a month, it's worth considering whether the ASX financial share is an opportunity today.
There have been some serious problems with some northern hemisphere banks after the collapse of Silicon Valley Bank (SVB). Credit Suisse is being taken over by UBS. Questions are being asked about Deutsche Bank.
I hope that we don't hear news of any more banking collapses because that wouldn't be good news for the global banking system, jobs or depositor money.
However, just fear alone can cause significant pain to share prices. It's that fear and uncertainty we can use to our advantage to buy shares of great businesses.
Are Macquarie shares a great opportunity?
When we look at how Macquarie shares have performed over the past 12 months, I think we can see that today's price is fairly close to the 52-week low. When attractive businesses hit a 52-week low, my interest is heightened.
I think it's fair to say that Macquarie has done an excellent job of growing the business since the GFC. It has diversified its earnings and improved the quality of the company.
Macquarie now has four divisions – asset management, banking and financial services, commodities and global markets (CGM) and Macquarie Capital. Some of those divisions are proving to be effective at providing ongoing earnings through the cycle, while others are good at capitalising on opportunities whilst they are there.
I believe that Macquarie's earnings are more resilient than other investment banks around the world. So it was no surprise to me that the company's net profit after tax (NPAT) for the nine months to 31 December 2022 was "slightly up" on the nine months to 31 December 2021.
I think that the best time to buy Macquarie is during times of sizeable market dislocation. It's understandable that (investment) bank share prices are heavily punished during this period of market worry. Investment banking activities can dry up during lean economic times. But, as I've said, I think Macquarie has diversified its portfolio enough to be defensively positioned.
With the Macquarie share price trading at close to its 52-week low, and its history of impressive expansion into new areas, I think the ASX financial share is a long-term opportunity. It's also possible it could fall further this year. We just don't know what's going to happen next.
Valuation
According to Commsec, the Macquarie share price is valued at around 14 times FY24's estimated earnings, where there is a forecast of lower earnings compared to FY23.
I think that's a reasonable estimate of what earnings could be, and it seems appealing considering the long-term global growth outlook of the business, with a good dividend and balanced dividend payout ratio.
