History shows that if you can identify oversold ASX 200 shares and buy them while they are cheap, then you could generate very big returns.
The tricky part is knowing what has been oversold and what has justifiably been sold off.
The good news is that Goldman Sachs has been doing the hard work for you. In fact, its analysts think they have found a dirt cheap ASX 200 share with huge upside potential and bucketloads of long-term growth.
The share in question is language testing and student placement (SP) company, IDP Education Ltd (ASX: IEL).
What is Goldman saying about this ASX 200 share?
Goldman notes that the IDP Education share price has fallen heavily amid concerns over the state of the student placement market following visa changes. However, it believes that IDP Education will be less exposed to these changes. It explains:
Destination market regulatory changes to tighten visa conditions. We now expect the student placement market to decline in aggregate in FY25E however we note a number of mitigating factors within, most importantly being IEL's focus on high quality, genuine students (not the target of govt. changes).
We introduce a bottom-up SP build demonstrating share gains can drive growth across FY24-26E even in a softer overall market environment, as we believe much of the weakness will be seen in lower quality students and institutions to which IEL has less exposure.
Strong growth ahead
In light of the above, the broker continues to forecast an earnings per share compound annual growth rate (CAGR) of 17% through to FY 2026.
And with the ASX 200 share trading at a significant discount to historical multiples, it feels a compelling buying opportunity has opened up for investors.
Goldman has reiterated its buy rating with a trimmed price target of $27.60. This implies potential upside of 32% for investors over the next 12 months. It concludes:
IEL trades at 28x our 12mf EPS estimate vs 45x historically and against a +17% FY23-26E EPS CAGR. Reiterate Buy into a strong 1H result where we sit +10% ahead of VA Consensus EBIT based on a strong start to FY24E as seen in the available visa data. News flow may continue to be choppy, however IEL's fundamental quality and structural growth drivers remain intact while the company possesses levers to continue to grow earnings (e.g. costs).
