'Clear path' to 20%+ earnings growth: The ASX 200 stock doing all the right things

Cutting costs while adding customer volumes could prove to be an excellent catalyst for these shares.

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If a company is reducing costs while global economic indicators are heading in the right direction for its business model, you need to at least take a look.

That's seemingly the case with electronic property settlement systems provider PEXA Group Ltd (ASX: PXA).

The team at Market Matters bought more of the S&P/ASX 200 Index (ASX: XJO) stock this week, and was immediately rewarded.

"The property settlements technology company hosted an investor day yesterday which saw the stock rally more than 5%," Shaw and Partners portfolio manager James Gerrish told Market Matters subscribers.

"The company maintained FY24 guidance of exchange margins to be broadly in line with FY23 and group margins to increase as Digital moves into breakeven by the end of the financial year."

Reducing headcount while customer volumes could accelerate

The bullish note is that Gerrish's team suspects there is "some chance" the guidance could be upgraded after a slow first quarter.

Costs have weighed the ASX 200 business down in the past, but there was an update.

"The investor day had some good news on that front too, reducing the headcount by ~10% which should reduce the cost base by ~$10 million on an upfront cost of $4 million."

To add to that, with interest rates looking like they will peak soon in many western economies, real estate transaction volumes could pick up in the coming years.

"We can see a clear path of 20%+ earnings growth in coming years with the risk to the upside on their recent UK acquisition increasing their global reach," said Gerrish.

"We expect property transaction volumes to continue to improve with global rates reaching a peak likely to prove a tailwind for PEXA."

These ASX 200 shares have many fans

Pexa is well liked among professional investors at the moment.

CMC Markets currently shows eight out of nine analysts rating the ASX 200 stock as a buy, with six of them recommending it as a strong buy.

With this week's top up, Pexa shares now take up 5% of the Market Matters' portfolio.

"[It's] a level we are comfortable with given the improving operational outlook and macro backdrop.

"Market Matters is long and bullish Pexa."

The Pexa share price is down 1% so far this year.

Motley Fool contributor Tony Yoo 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 PEXA 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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