Commonwealth Bank of Australia (ASX: CBA) shares have continued their positive run on Thursday and reached a new 52-week high.
Unfortunately, almost every major broker believes this leaves the banking giant's shares in overvalued territory.
In light of this, if you're looking for ASX bank stocks to buy, then you may be better off looking beyond CBA and the rest of the big four.
One option to consider, according to analysts at Goldman Sachs, is Judo Capital Holdings Ltd (ASX: JDO).
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Is it an ASX bank stock to buy?
This morning, Goldman has reiterated its buy rating on Judo Capital's shares with a $1.66 price target.
Based on where the ASX bank stock is currently trading, this implies potential upside of 30% for investors over the next 12 months.
The broker believes the market is being too pessimistic with Judo's margin potential and is undervaluing the company. It said:
We think the market's skepticism around the at-scale NIM focuses on the lending spread assumption of mid-4%, given the 1H24 spread was <4%. However, our comfort around this assumption stems from: i) historically, its lending spread has generally been in the mid-4%, ii) JDO's Dec-23 quarterly average new lending spread was 4.64%, and iii) its lending spread on its A$1.0 bn pipeline was c. 4.5%.
It then adds:
Our analysis suggests that, with the stock currently trading 26% below our TP, the market is implying very little recovery in the 1H24 back-book lending spread, despite the material improvement JDO experienced in both the front book and pipeline lending spreads through the half. Coupled with i) JDO continuing to demonstrate strong volume growth such that despite NIM pressures, we expect net interest income will still grow, and ii) a macro environment that we think will remain relatively supportive of commercial asset quality, we reiterate our Buy recommendation.
