Transurban stock 'normally doesn't offer this level of value': expert

The recent market sell-off has seen the toll road operator lose 15.5% over the past 3 months.

| More on:
empty toll road representing atlas arteria share price

Image source: Getty Images

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

Here's what a share market in correction can do: It offers value buying on stocks that aren't usually cheap, with one current example being Transurban Group (ASX: TCL) shares.

That's according to Sarah Shaw, chief investment officer at 4D Infrastructure, who says she wouldn't normally recommend Transurban stock as a buying proposition for ordinary investors due to its valuation.

Transurban shares are $12.10 at the time of writing, up 1.3%.

Transurban stock suddenly a value buy: expert

The recent market sell-off has seen the S&P/ASX 200 Index (ASX: XJO) tumble 7% over three months.

It's taken Transurban shares with it, with the toll road operator losing 15.5% over the same period.

Hence Shaw's advocacy of the ASX industrial stock now.

In the Australian Financial Review (AFR) today, Shaw said:

I'd never normally say this – just because normally it doesn't offer this level of value – but Transurban has become a top 10 position for us, and it hasn't been a top 10 position for us in eight years.

I've never really been able to push it before, because it just hasn't offered the value that it is offering today.

Other experts agree with Shaw.

Atlas Funds Management points out that Transurban is trading at a 25% discount to its pre-COVID share price despite greater traffic volumes and higher toll prices due to inflation indexing.

Citi has a buy rating on Transurban stock with a 12-month share price target of $15.90, implying a potential 31% upside for investors who buy today.

Citi analysts "see upside given the strong EBITDA growth outlook (c.12% CAGR between FY24-FY26)."

Why is Transurban trading cheap?

Like many other ASX 200 shares, the Transurban share price has been brought down recently by the market sell-off.

A market enters official correction territory when it has fallen more than 10% from its most recent peak.

On 30 October, the ASX 200 breached that mark, trading 10.1% down from its February 52-week high.

Latest Transurban news

Transurban released its September quarter update on 19 October.

The company reported its highest-ever quarterly average daily traffic of 2.5 million trips per day.

Transurban also reaffirmed its FY24 distribution guidance of 62 cents per share, representing an approximate 7% lift on FY23.

The company advised the market of a $250 million notes issue and $220 million loan facility today.

New CEO takes the reins

Michelle Jablko recently ascended to the role of Transurban CEO and managing director after nearly three years as CFO.

She took the reins on 19 October at the conclusion of the annual general meeting.

The job change just netted her 204,309 extra performance awards on top of the 181,058 she already held, along with 47,250 extra STI deferred securities on top of the 31,750 she already held.

She also holds 67,169 Transurban shares directly.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Transurban Group. 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 Scott Phillips.

More on Broker Notes

Red buy button on an apple keyboard with a finger on it representing asx tech shares to buy today
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 »

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX shares could rise 25% to ~50%

Big returns could await buyers of these shares according to analysts.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

rising asx share price represented by man with arms raised against blackboard featuring images of dollar notes
Broker Notes

Why these 3 ASX 200 shares just earned substantial broker upgrades

Top brokers just increased their share price forecasts for these three ASX 200 shares. But why?

Read more »

Two smiling men in high visibility vests and yellow hardhats stand side by side with a large mound of earth and mining equipment behind them smiling as the Carnaby Resources share price rises today
Broker Notes

See why this broker just upgraded South32 shares to a buy

Commodity prices continue to create tailwinds for ASX stocks.

Read more »

Keyboard button with the word sell on it.
Broker Notes

Sell these ASX 200 stocks now: Goldman Sachs

The broker is warning investors that these stocks could tumble from current levels.

Read more »

A man rests his chin in his hands, pondering what is the answer?
Broker Notes

Can Soul Patts shares beat the market over the next 12 months?

One leading broker believes the investment house could deliver good returns.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Broker Notes

3 under the radar ASX shares to buy this month

Analysts at Bell Potter think these lesser known shares could be top options.

Read more »