If you're on the lookout for exposure to the banking sector, then it could be worth looking outside the big four.
Especially when one ASX 300 bank stock has been tipped to rise 50% from current levels by analysts at Goldman Sachs.
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Why ASX 300 bank stock is a buy?
The bank stock in question is small business lender Judo Capital Holdings Ltd (ASX: JDO).
Earlier this week, it released its unaudited half year results and revealed a significant jump in earnings.
Judo posted an unaudited profit before tax (PBT) of $67 million for the first half, which was up 24% on the prior corresponding period. This was underpinned by continued above-system lending growth, strong net interest margins, continued investment in growth, and minimal write offs.
Looking ahead, it is forecasting a second half PBT of $40 million to $45 million, resulting in FY 2024 PBT of $107 million to $112 million.
This strong update caught the eye of analysts at Goldman Sachs. They commented:
JDO has pre-released its 1H24 results, with net profit before tax of A$67 mn, up from A$54 mn in 2H23, and 32%/20% above prior GSe/company compiled consensus (CCC). The beat was driven by lower-than-expected expenses and higher revenues (we expect non-interest income). BDDs were broadly in-line with GSe — but lower than CCC — and as such 1H24 PPOP was 19%/6% higher than GSe/CCC.
And while the broker acknowledges that the update didn't provide much information on its outlook beyond FY 2024, it is feeling confident about the future and feels that the market is being too negative. It summarises:
While the update will be positive for sentiment, we think it contained very little new information in relation to our outer year earnings, which remain broadly unchanged. With valuations still pricing in too negative an outcome around the sustainable profitability of the business model, our Buy rating is unchanged.
Goldman has a buy rating and $1.63 price target on the ASX 300 bank stock's shares. This implies potential upside of approximately 50% for investors over the next 12 months.
