Do you have room in your investment portfolio for some new additions? If you do, then the ASX 100 stock in this article could be worth considering.
That's because Goldman Sachs has just reaffirmed its buy rating on this company's shares.
Which ASX 100 stock is a buy?
The stock in question is testing services company ALS Ltd (ASX: ALQ).
On Thursday, its shares were sold off following the release of a trading update.
The ASX 100 stock revealed that its Commodities business has recently encountered volume headwinds within the Minerals division. It noted that volumes in geochemistry and metallurgy remain patchy, and fluctuations have become even more pronounced in July and August.
This led to management guiding to a 5% decline in underlying net profit after tax during the first half of FY 2025, which was short of what the market was expecting.
Goldman's response
Commenting on the trading update, the broker said:
ALQ guided to 1H25 EBIT ahead of pcp but NPAT ~-5%. Soft trading in Commodities was balanced by Life Sciences, resulting in slight EBIT growth, though greater financing costs—higher rates and lease expenses of A$6-7m from recent acquisitions—led to NPAT decline. Leverage may exceed the 1.7-2.3x range in 1H25, though with W/C challenges resolved, leverage should approach the middle of the range in ~12-18m.
While not overly impressed, it hasn't been enough to put Goldman Sachs off. Particularly given how the company continues to grow its market share. It adds:
Management believes ALQ has maintained or grown market share, and is satisfied with pricing and contract wins. The macro is mixed, with gold/copper prices and mid-long-term battery metal demand supportive, though slowing China demand and uncertain political environments globally are detractors.
In response to the update, the broker has retained its buy rating with a trimmed price target of $14.85. Based on where the ASX 100 stock currently trades, this implies potential upside of almost 9% for investors. And with Goldman expecting a dividend yield of almost 3% in FY 2025, the total potential return is nearly 12%.
Goldman concludes:
We decrease our FY25/6/7 EBIT by 6/4/4% reflecting the soft 1H25 guide. Incorporating valuation roll-forward, net-debt adjustments, and the Wessling acquisition, our 12-m TP declines ~5% to A$14.85. This implies ~15x EV/NTM EBIT in line with the peer median but below a max of ~19x, despite peer-leading mid-term revenue growth and margin expectations.
