Why this smashed ASX 200 share is a fundie's top value pick

It's an ASX consumer discretionary stock that has lost 40% of its value over the past year.

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ASX 200 share IDP Education Ltd (ASX: IEL) offers "stand-out value" for investors today after a 40% smashing over the past 12 months, a fundie says.

IDP Education is an international education organisation that helps overseas students get into courses in Australia and other countries, including New Zealand, the United States, and the United Kingdom.

The IDP Education share price has fallen by 40% over the past year to close at $16.05 on Friday.

This compares to an 8.55% gain for the S&P/ASX 200 Index (ASX: XJO) over the same time period.

Here's why fundie Prasad Patkar is a fan of this ASX 200 education stock.

Why this ASX 200 education share is a buy today

Patkar is the head of investments at Platypus Asset Management, a Sydney-based wealth manager that oversees $5 billion in assets.

Platypus's Australian Equities Fund made Mercer's top 10 list over one year after delivering a 15.71% return over the 12 months ending 30 April.

Platypus describes the fund as a high-conviction growth fund that usually holds 25-40 ASX shares.

It has exposure to ASX small-caps, and all of its selected stocks undergo a fundamental environmental, social, and corporate governance (ESG) analysis.

The fund's track record is an average 8.31% annual return since inception on 30 April 2006.

Among the shares held within the fund today are IDP Education shares.

Patkar reckons the ASX 200 education share is the most undervalued stock they currently hold.

As reported in the Australian Financial Review (AFR), he puts this down to short-term regulatory challenges, and maintains that IDP is on track to gain competitive strength over the next one to two years.

Patkar said:

At the present time we think IDP Education is stand-out value.

The business is facing regulatory headwinds in its key markets which we believe will dissipate over the next 12 to 24 months, and the business will emerge in a stronger position from a competitive standpoint than what it is today.

According to CommBank, IDP Education shares are trading on a price-to-earnings (P/E) ratio of 26.77.

Why overweight in ASX consumer discretionary stocks?

IDP Education is an ASX 200 consumer discretionary share.

The Australian Equities Fund is currently overweight in this sector despite high inflation and interest rates.

Consumer discretionary stocks make up 14.35% of the fund, according to the latest fund update.

However, the sector only comprises 7.28% of the ASX 300 Accumulation Index. (This is the index that Platypus aims to outperform (before fees and expenses) over a rolling three-year period.)

Consumer discretionary is the third biggest sector position in the fund behind healthcare at 19.56% and materials at 18.39%.

Patkar explains why they are overweight on ASX consumer discretionary stocks:

If we have a high conviction in the investment case for a stock, that is the risk reward stacks up, we buy the maximum we can, subject only to liquidity constraints.

Being overweight or underweight a sector is just an outcome.

Other discretionary stocks held by the fund include ARB Corporation Ltd (ASX: ARB), Lovisa Holdings Ltd (ASX: LOV), Aristocrat Leisure Limited (ASX: ALL), and Domino's Pizza Enterprises Ltd (ASX: DMP).

Patkar said:

We believe each of these businesses has resilience and defensive properties to withstand a moderation in consumer discretionary spending.

Motley Fool contributor Bronwyn Allen has positions in Domino's Pizza Enterprises. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ARB Corporation, Domino's Pizza Enterprises, Idp Education, and Lovisa. The Motley Fool Australia has recommended ARB Corporation, Domino's Pizza Enterprises, Idp Education, and Lovisa. 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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