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.

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%.

empty toll road representing atlas arteria share price

Image source: Getty Images

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.

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